Why I let $125,000 slip by
2 min. read •
In a previous post, I demonstrated how I missed out on the opportunity to accumulate at least $125,000 more than I have to my name. I think it's important to elaborate on why I made this mistake.
Let's start with the reason that impacts pretty much every child, teenager and young adult. Poor decision making and the lack of rational thought. It seems auto insurance companies have it right when they charge substantially more to insure anyone under the age of 25, as more and more scientific studies seem to confirm that the critical parts of the brain involved in decision making are not fully developed until the age of 25 or later.
The next reason was ignorance. I was an independent contractor at my first job, which meant my employer was not responsible for withholding my state and federal taxes. As a result I was taking home all my money for a calendar year before the IRS came calling. The hard reality was that more than 20% of my check ended up going to taxes, and this percentage only continued to climb over time. Unfortunately many Americans are not aware of how much money they actually take home (net), and live as if they really bring home their entire paycheck (gross).
The third reason complements the second. Not only did I not realize how much money I was bringing home, I also did not know how much I was spending. This is where a budget would have been a life saver. A budget allows a household to understand exactly how much they can possibly save each month. Not understanding your saving potential completely distorts the financial goals you set.
All of the reasons above created a perfect storm for me to make poor financial decisions. While I believe some of these reasons apply to everyone, there are a dozen more that may be unique to each individual. Most people boil down their financial misfortune to not making enough money, but more often than not there are several other root causes stifling them. Going through the process of creating a budget is the best way to identify what is stunting your financial growth and can clear the path for achieving your financial goals. Don’t delay, Take On Today.
You may be thinking:
I've created a budget in the past and it was not helpful.
Two things could have happened, either your budget was incorrect or you weren't using it correctly. If you have an accurate budget you should be able to predict how much money you will have in your bank account several months from now, know exactly where you may be overspending, and have an estimated date of when your debt will be paid off. If you have no debt, a budget can still be extremely helpful for future purchases and when/if you eventually retire.
