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Stay Home & Learn Finance - Foolish Mistakes that We Always Make on Money Decisions

Why do we always overlook the fact that the most valuable thing in life is never wealth?

How could smart people do dumb things with their money? Contradicting huh? It does sound a bit contradictory to me. But in fact, people do make this kind of mistake in real life and they may not even know that they have made these mistakes. So, without further ado, let’s begin!

Have you ever wondered why would some super-intelligent people, with a successful career or even a graduate degree from a prestigious college commit to similar dumb mistakes when it comes to their money?

And be aware! That person might be you!

So, what are considered to be dumb mistakes?

Jill Schlesinger’s book “The Dumb Things Smart People Do with Their Money” provided an excellent answer to that. In this book, Jill outlined 13 common mistakes even the smartest people on Earth like Sir Issac Newton might make with money.

In order to help you make a wiser decision on your money, here are 3 of the key takeaways from the book:

Takeaway #1: Make your financial plan around your life, not the other way around

Plenty of “success” individuals who attained enviable financial status out there actually make financial success more important than it should be. For instance, a lot of overworked professionals tend to forego vacation and quality time with friends and families simply for minimal improvements regarding their income.

Moreover, intelligent investors attach their full attention to the financial market on a 24/7 basis, encroaching all amazing time spending on their personal hobbies.

Source: People photo created by freepik

Let’s not forget the best ever financial plan is not necessarily about maximizing your income or social status, but the one that enables you to live a fulfilling and fruitful life.

For some people, attaining a C-suite position or becoming the next Warren Buffett or Jeff Bezos might be the only option. However, for most of us out there, remaining an individual contributor with a reasonable salary or being slasher with multiple interests could actually be better off.

Takeaway #2: Why are the most important things free?

Source: Wonder Women Talks

In this paragraph, I would like to quote from a speech from a very wise and successful old man in the business field, Coca-Cola’s former CEO Brian Dyson:

As per the above speech by such a wise and successful man in the business world, we all understand that the four glass balls – “family, health, friends and spirit” are all free in terms of monetary value. However, that doesn’t mean they are not valuable (and vulnerable). In fact, family, health, friends, and spirit might indeed be some of the most important things in our life.

They are “free” not only because you don’t have to “pay” for it to own it, but also the fact that they are actually priceless.

Takeaway #3: As a parent, how should you convey a correct financial concept to your kids?

To be consistent with the paragraph above, when you are educating your kids on financial management or simply talking about money, try not to attach too much emotion on the topic.

For example, you might be resentful because receiving less amount of bonus compared to your colleague Paul given your better professional performance. But let’s not spend 30 mins attacking Paul for getting an extra bonus that he doesn’t deserve during family dinner.

Source: Designed by Pressfoto / Freepik

First of all, your children are definitely not your psychological counselor and he or she wouldn’t be able to give you any professional advice regarding the unfair distribution. More importantly, you are conveying a strong message over-emphasizing the importance of monetary success.

That instills a wrong mindset of “higher income I earned, happier I would be” to your kids, which might lead to biased and undesired life decisions such as choosing an occupation he or she doesn’t like simply because of a better income.

So, instead of making your beloved children believe that financial success means everything in the world, try to educate them on the correct financial concepts with a rational tone. Also, encourage them to pursue the path they are interested in rather than the one they get rich.

Keep it up! Eventually, we will all be able to avoid most of these dumb mistakes and live a more desired and fulfilling life!

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