Have you ever bought a car on a 6 year car loan? That’s okay. You can easily fix that. Have you ever had an interest-only mortgage on your home that later caused you trouble? That’s okay. You can easily fix that. Have you ever had a bad dining-out problem? Uh oh. That’s kinda a big deal.
As people have shared their financial lives with me over the years, one thing has become abundantly clear: mistakes cause more financial problems than emergencies do. This means that your financial success is more dependent on your behavior than it is mother nature, Greek Gods, and/or bad luck. Your ability to avoid mistakes, and then correct past mistakes, will be the key to your financial success.
In studying peoples’ mistakes I have learned that there are two primary types of financial mistakes. Big mistakes. And little mistakes.
Big mistakes (house, car, education, career, or family/money mistakes) seem as though they will create the biggest problems. However, small mistakes actually can do the most long term damage. It’s because small mistakes are created with poor behavior and habits, while big mistakes are based on poor judgement. Learning your lesson from a big mistake is actually quite easy. Did you buy too much house? Fine, don’t do it again. Lesson learned. Do you spend too much on convenience dining-out? Uh oh, this is going to be challenging. Why? Because of all the habits involved. Big mistakes are usually caused by a lack of knowledge. You didn’t know that you should buy a house that is the maximum amount that the bank lets you buy? Well, you shouldn’t. Lesson learned.
In order to stop making small mistakes, like too much convenience dining out, you must change a tremendous number of habits. You must become a better grocery shopper. You must become a better cook. You must become better at time management. You must become a better planner. You must improve your will power. Etc. All of these skills/habits must improve to correct one simple mistake.
Most people find themselves predisposed to either big mistakes or small mistakes. They usually have a grip on one, but not the other. I’d rather run across people that make big mistakes because they are easier to prevent in the future. Whether you know it or not, this entire website is dedicated to helping you prevent/fix mistakes. I mainly focus on small mistakes because they are the hardest to fix.
There is the rare occasion that I run across someone that makes both small and big mistakes. This is a problem. Not only does this person have to change their habits, but the big mistakes that they made will make it harder to fix their little mistakes. The big mistakes usually affect cash flow on a longer term basis. It can be a very frustrating process for them. It literally takes years to fix someone in this situation. But THAT’S OKAY! The alternative isn’t a good choice either. Not addressing your financial mistakes is shockingly common, and predictably a terrible idea.
So, what kind of mistakes do you make? And are you committed to fixing them?
Peter Dunn a.k.a. Pete the Planner® is an award-winning financial mind and a former comedian. He’s a USA TODAY columnist, author of ten books, and is the host of the popular radio show and podcast, The Pete the Planner Show. Pete is considered one of the foremost experts on financial wellness in the world, but he’s just as likely to talk your ear off about bass fishing.