Eight mistakes to avoid when growing your wealth

Obviously, when building wealth, it is important to make the right financial moves. However, it is equally important to avoid rookie errors. Even more important is to avoid serious mistakes that even veteran investors might make. The reason you want to avoid mistakes is because not making the right move might cost you the opportunity to grow your money. However, actual mistakes can send your net wealth backwards, causing you to be worth less than you were when you started.

  1. Choosing the wrong advisor

The wrong advisor can cost you a lot of money. First, the wrong advisor can cost you a lot of money in up-front or back-end fees. These fees are called entry or exit commissions, and they take a lot of money whether your investment pays off or loses ground.

When looking for an advisor, it is important to find one that charges for advice. If you find one that charges commission on sales, he or she could push you toward poor performers, which might prompt you to make an early sale as your money plummets. IN this instance, you lose money, and the advisor still gets a commission.

Simply put, you should not hire an advisor that earns a living by sales commission. Instead, you should find one that offers sound advice and charges accordingly.

  1. Letting emotions get the best of your steely judgment

Learning not to zag when the market zigs is tough because your emotions will always be in the mode of battle or run. If you make battle buys when things seem positive, you might be extending yourself too far. Similarly, if you run when the market bounces, you might lose out on significant later earnings as the market proceeds onward and forever upward.

  1. Going foreign

Finding a local advisor is important because you need to have someone at your side who understands local markets and local needs. An online advisor might be stationed half a world away from you, which can complicate the strength of any advice you might receive.

  1. Ignoring proven performers

Some vehicles are proven performers. These include mutual funds, real estate, and certificates of deposit. Additionally, a high-paying savings account can protect your money and give you a minuscule but consistent payout. If you are always chasing risky opportunities, you might be feeding a gambler’s instinct rather than developing the skills required to make sound investments.

  1. Spending on wants versus needs

Spending on your wants can eventually hurt your ability to obtain the financial stability you will eventually need. As such, it is important to ensure your wants are always managed within a certain spending threshold. Once you establish your spending threshold, every penny you make should go into savings for your future financial base.

  1. Debt

Using debt is often a poor idea. First, you can end up with more debt than you can reasonably pay off. Second, using debt as an investment tool is a complicated strategy with weighty consequences if your investment choices are wrong.

If you are going to use debt, the best way to handle it is to ensure that anything you charge to your credit card will easily be covered by your next paycheck. Doing so eliminates the possibility of carryover debt and allows you to take advantage of reward programs, which can save you money.

  1. Draining your base

Many people that do happen to build a financial base often undercut their future stability by spending that base on things like home improvements, medical bills, or lavish vacations. These choices are driven by a variety of motivations, but you need to remember that these motivations will always exist. After two or three bad decisions, you will still have bills, home needs, and the desire to take vacations. However, you will have no more base. As such, you will be risking financial catastrophe.

  1. Narrow asset categories

If you invest all your money in donuts, you might not be surprised to lose it all when the donut industry does not perform well. However, this extreme example is a mistake people make in that they invest in one seemingly sound area like real estate or tech stocks.

For the safest route to financial health, you should do an internet search for best financial planner Brisbane and invest in no fewer than three to six different vehicles. Doing so will ensure your entire financial portfolio does not tank when one of your favorite industries dies.

By: Raymond James

About the Author:

Ray is a sought after thought leader and an expert in financial and money management. He has been published and featured in over 50 leading sites and aims to contribute articles to help novice financial planners. One of his goals is to impart his knowledge in finance to educate and help ordinary people create and achieve their financial goals.