Of course, I found two pair of socks in one day. One pair in the garage, and another on the playroom floor. I called him over and made him pick them up and bring me $2 dollars. Let the fit-pitching begin!
“I didn’t leave them there!”
“That one is Donald’s, not mine.”
“What are you doing with my dollars?”
STOMP, STOMP, STOMP
“There - are you happy now?!”
Needless to say, there was some additional time-out until my little emotionally charged elf cooled off. Once he calmed down, he came out and apologized for his rudeness and for leaving his socks around. He hasn’t lost any more money since then.
We all mess up and make mistakes. For adults, sometimes that means overspending on a retail therapy session. Other times it may be a monthly payment that goes overlooked and incurs a late fee. Whatever the situation, there are times when we are supposed to do one thing and instead, do another. It happens, we’re only human!
When it comes to our finances, a simple mistake can feel like the end of the world. But in reality, it’s not! And despite how catastrophic it may feel in the present, it rarely disqualifies you from achieving long-term financial success.
Let’s face it, mistakes are inevitable. In fact, if you were to survey some of the most productive people around, they would probably say that making mistakes is one of the most important qualities in achieving success. And they’re right!
Successful people admit their mistakes, learn from them and move on. The good news is, you can replicate this idea and apply it to your personal finances. Here are some ideas to help you move forward.
Admit Your Fault
One of my biggest pet peeves is when my kids make a mistake and immediately resort to an excuse for why it happened. No matter the reason, my response is always the same: “Own your mistake.”
Owning our mistakes means to accept that we messed up and made a poor decision. When you attempt to justify a mistake by making an excuse, you are unlikely to reap positive results.
By excusing the behavior, we are conditioning our minds to avoid taking responsibility for our actions. As a result, the negative behavior that contributed to the mistake will never change. It's easy to say "I didn't know I would need new brakes on the car" rather than admit fault by saying: "I didn't save up for regular car maintenance."
Admitting fault is the first step in dealing with mistakes and is a necessary part of avoiding them in the future. It’s easy to weasel out and look for someone or something to blame for your shortcomings. Instead, you should take responsibility even if you are not the only responsible party.
Learn from Your Behavior
If you can own up to a mistake as soon as you make it and do your best to correct it, you can often prevent it from turning into an issue down the line. This is easier said than done. Often a simple mistake, like a missed payment or a purchase that was not included in the budget, can seem like a minimal thing -- almost like an isolated snowflake in a winter storm.
Many people run into trouble when a small error starts to snowball, gains momentum and becomes large enough to destroy your finances without you being able to do anything about it.
This is why it is vitally important to discover the reasons behind your financial mistakes. As I mentioned earlier, mistakes will happen, but understanding why and recognizing what led to them is going to be what creates a change in behavior.
In talking to others about decisions that have resulted in financial trouble, I find that there are a few red flags that present themselves before things take a turn for the worse. These include:
- Unwillingness to budget or maintain control over income and expenses
- Lack of discipline around saving for large purchases
- Impulse spending
- Setting unrealistic expectations -- an unwillingness to live within means
- Fear of the unknown (ex: investing, budgeting, new process).
When a mistake happens, take a moment to do some self-reflection and see if you can identify the reasons behind many of the financial mistakes that you’ve made. You might be surprised to see that your financial mistakes are the result of a number of different factors listed above. But don’t fret, this discovery is important because now that you recognize the causes of trouble, you can make a plan and create new habits going forward.
Move On and Create New Habits
“If you always do what you’ve always done, you’ll always get what you’ve always got.”
― Henry Ford
If you’re looking to overcome financial mistakes, you must be willing to create new habits.
Let’s take a look at goals, for example. Think about what’s important to you. Maybe it’s paying down debt, or saving for a home, or simply a family vacation. Now, take a look at your actual bank statement and see if your expenses align with those goals.
If they don’t, there’s a problem -- and the perfect place to start creating a new habit. Now that you’ve identified the impediment to reaching your financial goals, make an effort to stop spending on things that don’t move you toward the goal that really matters to you. This could be something as simple as skipping your early morning $5 latte, or cancelling the seldom-used-gym-membership. However, if you goals are big, you may need to cut more than just small expenses. You may need a big financial reset.
As with starting anything new, taking it slow is the key to creating and sustaining the habit long-term. It’s impractical to think that you will pay off thousands of dollars in debt or build a robust emergency savings in a matter of months. Instead, set realistic expectations that will allow you to experience small wins along the way.
Be sure to find ways to reward yourself along the way, too. There’s just something about attaching positive reinforcement to an otherwise challenging goal that provides a little extra motivation to stick to your new habits. This doesn’t have to be anything elaborate or expensive. Maybe just a nice dinner or matinee movie, or a coffee splurge. Or have your kids create a chart and put stickers on it for each budget win. Involving the whole family gets everyone to help move toward the goal.
The key here is to find something that you enjoy -- something that adds value to your life -- and use that as an incentive to stay on track toward reaching your financial goals.
If you find that money mistakes are negatively affecting your financial success, you can (and should) change your behavior -- even if that requires significant effort on your part. It’s never too late to start!
By accepting responsibility for your mistakes, understanding the reasons why, and changing your habits, you have an excellent chance to avoid money mishaps and achieve your financial goals.
Ready to take action and overcome your financial mistakes, but need a little help getting started? Head over to the site where you can learn about the benefits of working with a Certified Financial Planner® and schedule a complimentary meeting to discuss your specific situation.
Pamela J. Horack, CFP® of Pathfinder Planning LLC provides personal financial planning advice for a simple fee to young adults and working families in North and South Carolina through group classes, one-on-one planning, and ongoing advice.