Most of us will admit to having made some financial mistakes we regret–running up credit card debt, impulse buying, or making a bad investment or business decision. While there can be significant devastation, the key is to move beyond regret into productive action. What, then, are some strategies that can restore a person’s self-confidence and avoid financial failures in the future?
The Key Takeaways
o It’s important to know that others make financial mistakes, including the most experienced investors and successful business people.
o Recognizing and learning from our mistakes can help us to avoid repeating them in the future.
Recognize and Learn from Past Mistakes
Sometimes a financial setback is not our fault; for example, the recession that resulted in losses for many in the stock market, housing and even jobs. Some of the losses were on paper, but some were realized. Even when financial setbacks like these are out of our control, we can look back and see how we might have been better prepared or reacted in a different way that would have produced better results. For example, having a bigger nest egg or emergency fund might have prevented having to dip into retirement savings or sell real estate in a down market.
Most of the time, however, we make our own mistakes. Learning from these mistakes so we don’t continually repeat them takes some introspective examination. Do you make impulse purchases? Are you wasting money because you don’t comparison shop or you buy items you don’t need or use? Are you trying to make a quick fortune in the stock market or other investments?
What You Need to Know: You probably will make more financial mistakes in the future. (Hopefully, they will be small ones and not big ones.) Instead of dwelling on your mistakes as personal failures, learn from them, accept them as part of growing and maturing, and determine not to make the same ones again.
Actions to Consider
o The best way to avoid financial failures in the future is to become educated. Learn about basic principles of personal finance and investing, and invest for long-term growth instead of an instant fortune. Use your professional advisors as a sounding board to guide your thinking. Evaluate why you made financial mistakes in the past and think of ways to keep yourself from those situations. For example, if you overspend when you are bored or feeling low, find other ways to lift your spirits and occupy your time.
o When you do make a mistake, don’t panic or get depressed. Take some time to think about what you did and why, and if you can correct it. If you can’t undo your error, think about how you can live with it; you may have to cut back in other areas. Don’t beat yourself up; just try to do better the next time.
o You can also gain by learning from others’ mistakes as well as giving back by sharing your own.
o Keep focused on your long-term financial goals. Periodically evaluate where you are and encourage yourself. While you may continue to make some mistakes, recognize how much you are learning and the improvements you are making.