7 ways you’re losing money without realising it

Summary

In this video, Nisha, a qualified accountant and former investment banker, shares seven common money mistakes that can sabotage personal finances. She advises against avoidance coping, obsessive comparison, and keeping large cash reserves idle. Nisha emphasizes the importance of investing in education, understanding one's hourly rate, living on 90% of income, and focusing on income growth over cutting expenses. She also stresses the need for tracking expenses to avoid financial stress and achieve financial goals, offering a free spending template to help viewers manage their finances effectively.

Takeaways

• 😌 **Avoidance Coping**: Ignoring financial issues can lead to a lack of progress towards financial goals.
• 🔔 **Behavioral Nudges**: Use subtle changes in your environment to encourage better financial decision-making.
• 🚫 **Obsessive Comparison**: Constantly comparing yourself to others can lead to overspending and poor financial choices.
• 📝 **Ideal End State**: Define your ideal life to guide your spending and saving decisions.
• 💸 **Capital Turnover**: Keep your money circulating to generate more wealth instead of letting it sit idle.
• 🎓 **Invest in Yourself**: Enhance your earning potential by investing in education and skill development.
• ⏳ **Hourly Rate**: Determine your time's value and outsource or delegate tasks that don't align with your hourly rate.
• 💹 **90% Rule**: Aim to live on 90% of your income, directing the remaining 10% towards savings and investments.
• 🔪 **Cutting Back vs. Earning More**: While cutting back is important, focusing on increasing income can have a more significant impact on your finances.
• 📊 **Expense Tracking**: Keep track of your spending to avoid overspending and to manage your finances effectively.

Q & A

What is the term used in psychology to describe the tendency to avoid dealing with financial issues?

The term used in psychology to describe the tendency to avoid dealing with financial issues is 'avoidance coping'.

How can behavioral nudges help in addressing the avoidance of financial responsibilities?

Behavioral nudges can help by introducing subtle changes in the way choices are presented to encourage better decision-making without restricting freedom. This can include setting up automatic alerts for financial activities or automating savings and investments.

What is the impact of obsessively comparing oneself to others financially?

Obsessively comparing oneself to others can lead to spending beyond one's means or making choices based on others' possessions rather than one's own needs, potentially draining one's finances.

How can creating an ideal end state list help in managing the desire to keep up with others financially?

Creating an ideal end state list helps by providing a detailed vision of one's desired life, which can be used to evaluate if potential purchases align with one's true goals and values, thus reducing the urge to compare and compete financially.

Why is it important not to let capital sit idle in a bank account?

Not letting capital sit idle in a bank account is important because it ensures that money circulates and works to generate more wealth, taking advantage of potential returns from investments rather than earning minimal interest.

What are some strategies for turning capital quickly to make it work for you?

Strategies for turning capital quickly include investing in education and skill development to increase earning potential, and investing in index funds that historically provide higher returns than regular savings accounts.

What is the concept of assigning an hourly rate to oneself and why is it significant?

Assigning an hourly rate to oneself is significant because it helps in understanding the value of one's time and making decisions on how to allocate time to maximize earnings or delegate tasks that do not align with this rate.

What does the '90% rule' suggest as a strategy for financial management?

The '90% rule' suggests living on 90% of one's income and saving or investing the remaining 10% to build wealth and break the cycle of spending all that one earns.

How does focusing on cutting back expenses compare to increasing income in terms of financial growth?

While cutting back expenses is important, focusing on increasing income has a higher potential for financial growth as there is a limit to how much one can save, but the potential for earning more is much greater.

Why is tracking expenses crucial for financial health?

Tracking expenses is crucial as it provides insight into spending habits and helps in creating a budget, which is essential for saving, investing, and managing debt effectively.