3 common money traps to avoid

The key to financial happiness, according to author Mike Finley, is avoiding common, money-wasting...

The key to financial happiness, according to author Mike Finley, is avoiding common, money-wasting traps. (SUPPLIED)

Linda White, Special to QMI Agency

, Last Updated: 3:55 PM ET

The boss calls you into his office and shares with you good news: you’ve earned a promotion and a raise. But whether those extra dollars you’ll earn remain in your bank account or if they’re already burning a hole in your pocket could mean the difference between becoming a self-made millionaire or not.

That observation comes from Mike Finley, author of Financial Happine$$ (thecrazymaninthepinkwig.com). The book outlines his journey to financial literacy and the principles and practices that allowed him to retire from the U.S. Army a wealthy man. The following are among the common money traps he learned to avoid:

1. Living paycheque to paycheque

“It’s very easy to raise our living expenses to equal our paycheques, especially when we see others doing the same,” Finley says. “But those people end up creating no wealth over time because they spend their money on depreciating assets that basically delete their wealth gradually.”

Living below your means, on the other hand, can help you achieve wealth, even if it means you don’t look the part — something that can be difficult to pull off if you don’t have a healthy dose of self-esteem, Finley says.

He recommends saving at least 20% of your gross paycheque. “It comes down to paying yourself first and immediately and then teaching yourself to live on what remains instead of spending what comes in and saving whatever’s left, which is often little to nothing...By learning about compound interest and how that builds money over time, passive income can one day overcome your earned income.”

2. Work a job you hate and spend your free time buying happiness

If your job doesn’t bring you self-fulfilment, if you’re unhappy or downright miserable at work, you may find yourself trying to buy happiness when you clock out.

But doing so creates a vicious circle: the more you buy, the more debt you rack up and the greater the need to work at the job you dread. “Stop spending money and start saving money. Doing so will provide you an exit from the world you don’t want and into a world you do want,” Finley says.

3. Make the appearance of wealth a top priority

The material trappings of a faux lifestyle matter to far too many people and ironically will lead them in the opposite direction of financial freedom, Finley maintains.

“When you grow up poor, (those material trappings of wealth) tend to serve as a security blanket that you never really had in your life. You have to stand back and think about what you really want in your life. Chasing after that illusion of wealth is not going to get you there.”

On his quest to becoming a self-made millionaire, Finley realized the journey is about much more than money for most.

“It’s a transformative process: you’re reaching for more money but really what people are reaching for is deeper meaning to their life and an understanding how they fit, what they want to be and who they want to be in life.”

 


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