What is the biggest mistake when trying to save for investing?

Question

What are some of the worst ways to spend money when trying to save for investing?

Jacob Ritter · Answer

Hey, Christopher!

I think some of the worst ways you can spend money are many. The most common way I see people misusing money is when they spend it mindless or on things that they don't truly value. This can be very subjective, so you will have to evaluate what you truly value and whenever you spend money (whether it be $100 or $1,000,000) that it has some true, impactful purpose behind it.

People also aren't methodical when it comes to saving money. You need to make sure you pay yourself first, not as a last resort if you have any money leftover at the end of the month. My typical rule of thumb is make sure you get two things on auto pay - bills and savings. 50% of your money should go towards necessities, 20% towards savings which leaves you 30% for fun money. The more you can lower the necessities and fun money and increase your savings the better, but don't neglect yourself in the process. Hope this helps!

Feel free to reach out personally if you have any other questions. Best of luck, Christopher!!

Haley Powell · Answer

This is kind of banking off of what Jacob said, but I think it's crucial to establish what matters to you. For example, I have friends that love concerts, music festivals, and those types of experiences. I don't. I've had to decline invitations multiple times, and each time it was difficult because I knew I'd enjoy their company, but in the end, it wasn't worth the money for me. With that said, there are things I like to splurge on that hold no appeal to others. Find what is worth a dent in your funds and avoid what isn't, "Is this worth the financial setback?".

If you want a more concrete list, some of the worst ways to spend money (in my opinion):

Going to the movies, buying drinks out regularly, trendy home decor (that will soon be out of style), buying a new car, eating out regularly, impulse buys (of basically any kind, to include travel unless it's an insanely good deal), books you won't read (if you know you'll read them it's fine), anything to "keep up with the Joneses", basically anything that won't last.

Most of these are fairly small things that don't hurt every now and then, but I've seen people (including myself) fritter away embarrassing sums of money on some of this stuff.

Anthony Gayden · Answer

Gambling, lotto tickets, tobacco products, excessive drinking.

If you go beyond that I would say buying anything with the intention of displaying your wealth. For example designer fashions, nice jewelry/watches, etc. You can buy this stuff after you are wealthy.

Also listen to Dave Ramsey's advice when it comes to your car. Buying a new car can be a terrible waste of money.

The absolute worst way to spend money while trying to save though is through paying interest to creditors. There is absolutely no sense in paying high interest creditors interest when you are trying to save to invest. Pay off those debts first.

Christopher Krueger · Answer

@Jacob Ritter thank you for the feedback this is very helpful. I have a friend who has a truck payment that adds up to about $700/month.  At the end of the month there is little left for fun, much less savings or investing, so just trying to show him how much of a difference getting rid of that truck payment could change his future. I love the way you put it, decide what’s important to you.

Chris DeMello · Answer

Kinda the same of what Haley & Jacob said...

To me some of the worst ways is the little miscellaneous spending that seem harmless like a starbucks everyday. $4 or $5 dollars seems minor but it adds up quick. Or workers who buys lunch everyday instead of making it. That can be $200 a month in food. Question every purchase. Is this a need or a want? Is it getting me closer to my goals or further away? Just a matter of how bad you want to hit that savings goal. I see it all the time, they're wondering why they can't save money but they're spending it all on food or buying things they really don't need. Again it just comes down to how bad you want it and what are you willing to sacrifice! It's a lot easier said than done. Especially in today's world where everything is buy this and eat that! I personally still struggle with this, especially living in Las Vegas, but just like life, there is good days and bad days. Just be accountable to yourself, fail forward and keep grinding!!! That's my 2 cents.. LOL   Good luck!

What is the biggest mistake when trying to save for investing?

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