Money is always not enough for me!

Again it have been sometime i have not write, anyway have you always wonder why, no matter how much you earn its never enough. Read the list below and you might find an answer for it.

1 Financial Ignorance

It seems almost fashionable for some to plead ignorance over finances with the result that we either make the wrong choices or abdicate responsibility to some kind of adviser who may or may not act in (or even fully understand) your best interests. You don’t have to be Warren Buffett, but acquaintance with the basics is within most people’s grasp. Spend a few hours with a book such as Personal Finance For Dummies by Eric Tyson.

2 Inertia

Though money is pretty important to most people we don’t always act like it. By taking a little time and trouble to find the best deal you can save a small fortune on insurance renewals, savings rates,  credit cards, mortgage etc etc. And with the Internet, and the many comparison sites, it’s never been easier to find the bargains.

3 Failing to Follow the Fundamental Financial Formula (FFF)

ie Money Gained (Lost) = Income – Expenditure

Dickens’ Mr Micawber expressed it thus: “Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”

Yet burgeoning credit card debts show many of us continue to spend beyond our means with the inevitable problems tomorrow. A simple but effective exercise is to calculate your total income and expenditure  for just one week or month, and if the FFF’s in the red you know you’d better make some changes.

4 Lack of Planning

You wouldn’t start a journey without knowing where you’re going and having a (vague idea of a) route. But many people’s financial `goal’ is just to have plenty of money some unspecified time in the future. You need to set specific goals, eg a vacation, car, house deposit, school fees, an amount you’d like to retire on…

Once you’ve done this, you can work out how much you need to save/invest, at what rates, in order to realize your dream. of course, when you do the math you might find some of the goals need scaling back (or you need to raise the amount you save) at the level of risk you’re willing to assume. But at least you’ll end up with a specific and realistic plan.

5 Mental Accounting

This describes the tendency to treat some money differently than the rest. You might, for example, be over-cautious with an inheritance from a loved one, over-reckless with an unexpected lottery win, or maybe you hold large balances on low rate savings while keeping expensive debts on a credit card… Mental accounting can be a good thing if it encourages you to budget better, but beware you don’t lose sight of the big picture.

6 The Sunk Cost Fallacy

Or throwing good money after bad. For example, you’ve spent a small fortune fixing up your old car, yet it still keeps breaking. Though logic tells you to buy another one you’re reluctant to do so because of the amount you’ve spent on repairs. The same tendency can make us reluctant to get out of a bad stock. Remember, what’s gone is gone, and shouldn’t sway your analysis in the present.

7 Paying Too Much in Fees

Time and again research has shown the average managed mutual fund underperforms the market (index) after fees. Sure, some do come out on top, trouble is you can’t identify them in advance. Low cost index trackers or ETFs are a much wiser choice for most investors.

8 Impatience

This manifests itself in frequent buying and selling of stocks, dumping those that don’t provide instant gratification in the ceaseless quest for those elusive winners. The only person this is likely to benefit is your broker as counts your commission fees. Impatience is evident in our spending habits. The desire to have everything now means we often pay twice as much by getting it on credit. You can save a bundle by doing without while you save up to buy cash. Also by spending less on “things” today and instead investing in quality assets we can have a lot more “things” tomorrow.

9 Failure to Diversify

Markets fluctuate – fact! We need to protect ourselves from this roller coaster by not putting all our eggs in one basket. Something to particularly guard against is investing too much in your employer’s stock. This is good for employers as stock-holding workers are likely to be more motivated, but could be very bad for you. If your employer goes bust you lose your savings and your livelihood. Other ways to diversify are through different asset classes (cash, stocks, bonds, real estate) and geographically, most people hold most assets in their own country, but these days it’s easy to invest elsewhere (most easily through an appropriate index tracker).

10 Not Understanding Your Risk Tolerance

Risk and reward go hand in hand. The higher the returns, the greater the risk. There’s no right answer to the amount of risk you should assume, it’s an individual thing. Generally though, the younger you are the more risk you can take. You can allocate different portions of your funds to different levels of risk, eg keeping most of your money in a broad index tracker with, say, 10% in penny stocks. The choice is yours, just be sure you make it consciously.

Mon