Paying too much for something, not saving enough or not making the right investments — we’ve all made money mistakes. And, according to Paridhi Jain, founder of financial education platform SkilledSmart, which helps people learn how to save, invest and manage their money, there’s a very obvious reason for that.
“Honestly, most of us are never taught what to do with money,” she says. “We’re not taught at school, we’re not really taught by our parents. So, most people are really just ‘winging it’ and learning on the go. Most people are taught that all they need to do is ‘go to school, get a good job, earn money’ — that’s it. They’re never told that actually learning how to manage the money you earn is a whole skillset in itself.
Additionally, money is still somewhat of a taboo and secretive topic, Jain says. Most people don’t talk openly about it so it’s shrouded in secrecy and mystery.
“You end up in this position where you’re not quite sure what you’re doing, but also, you’re too scared to ask any questions, or even know what to ask or who to ask.”
But learning how to create a strong financial foundation can be life-changing, says Jain. Once you fix your finances, you can experience more freedom, less stress, less conflict with your family over money, and more choices and options that come with having money— whether it’s travelling, quitting your job or going on holiday more often.
“Ultimately, we should aim for money to be something that can support and enable us to live the life we really want to live, instead of something that holds us back or limits us,” says Jain.
So, what are the most common money mistakes Jain has seen? Ahead, she shares three of them.
Not Investing Your Money
“Many think that investing is optional, or just for certain people, like ‘rich’ or ‘nerdy’ people,” says Jain. “A lot of people think investing is for ‘rich people’ or ‘finance nerds’. But investing is a bit like exercise. Everyone needs to exercise. Now, the specific exercise that is a good fit will vary from person to person, but everyone needs some exercise to stay healthy.
Just the same way, investing is really important for your financial health, she says. It doesn’t matter what your age, profession, educational background, investing is important for your financial health.
“The reason is because of ‘inflation’,” says Jain. “Inflation means that the value of your money is going down every year. Once, you could buy bread for less than $1. Not anymore. That means in five years, you won’t be able to buy as much stuff with $100 as you can today.
“So, your money needs to find a way to ‘keep up’. You do that through investing your money, eg. putting it into ‘assets’ which allow your money to go up in value over time, instead of down.
“If you don’t invest, you’ll always feel like you’re behind, like no matter how hard you save it’s never enough, like you’re going ‘backwards’ over time even though you’re working hard.”
Focusing Too Many Much on Getting More Money
Next mistake: focusing too much on increasing income, and too little on managing that income well.
“A lot of people tend to think that the answer to all money problems is simply earning more money,” says Jain. “So, they keep chasing promotions, higher-income professions, trying to forever get a bigger paycheque.
“And yes, earning more is great. But there are plenty of millionaires who go broke, lottery winners who file for bankruptcy, six-figure earners who live paycheque to paycheque. Why? Because earning more money on its own is not going to fix all your money problems.
“If you don’t know how to save and invest what you’re earning, you’ll never be able to create long-term, sustainable wealth. It’s not just about how much you earn, it’s also about how you manage it.”
Not Learning About How to Handle Money
And finally, the last mistake Jain says she often sees people make is to shove their finances under the rug because it’s too hard and scary.
“Money can be a really confronting topic for a lot of people,” she says. “It can feel embarrassing to admit you don’t know what you’re doing, and the whole topic can feel overwhelming and intimidating.
“So, a lot of people just avoid it. It’s too hard and too scary to look at, to try and make sense of. They hope it will get better on its own. Or they hope someone else will take care of it – a spouse, family member, or financial professional. This can go on for years and sometimes it takes a full-blown crisis for people to really face their situation.
“But here’s the thing: avoiding it doesn’t make the problem go away. Refusing to look at your bank account doesn’t somehow make the problem non-existent, y’know? The only way to change it, is to face it. Is that confronting? Yeah, sure. But there’s also enormous relief in knowing that facing it is one step forward on the path to changing it.”