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The top three mistakes I see as a wealth advisor

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by Paul Kindzia in Happiness, Personal Finance
August 30, 2022

“People don’t intentionally screw up their lives.  A bad life is often like trying to bake a cake without a recipe, the wrong ingredients, and without an oven.  If you don’t understand all of the individual components and how they relate to one another in the right context (and the right order), your cake will be more like a soggy mess unworthy of any frosting and sprinkles.  It certainly won’t be an enjoyable eating experience.  If you are making any of these three mistakes, it’s just a function of time before you start realizing that things are going south fas.”

Wouldn’t it be nice if we were all just handed a set of instructions that when followed turned us all into happy and booming successes?  To make things more frustrating, what we believe are “the right things to do” based on information from the media, Hollywood, our employers, or the government, are often the items most responsible for screwing up our lives.  As a wealth advisor who has worked with households of all kinds over the years, I want to share the three biggest mistakes I see people make as they progress through life.

All wrong doing is done in the sincere belief that it is the best thing to do.” – Arnold Bennett

Before sharing the biggest mistakes, I want to share a short personal story.  In the mid 1990’s I met a guy (who was in his 40’s) that was trying to give a young kid (me in my mid 20’s) some honest good advice.  He said, “When you buy your first house, just buy the biggest most expensive house you could afford because you’ll quickly grow into it.  You’ll be amazed at how fast you’ll outgrow it and you must keep repeating that but you’ll make more money that way.”  For a moment of time, I thought he was handing me the magical secret sauce to life.

Sure, I already had knocked out my accounting degree, earned my CPA designation and had an MBA in corporate finance.  But what did I know?  I was living in an apartment while this guy was living in a huge house with a swimming pool on acreage.  He was also a real estate professional in the commercial sector.  I asked him how was I to buy a big and expensive house?  He said, “Easy, all you need is a small down payment.  The bank will loan you the rest.”

Fast forward a few decades and it is very clear to me the flaws that were happening in that entire sequence of events.  First, when you are young (and stupid), you don’t have enough experience and wisdom to sort out good advice from bad.  Rather, you use anchor points for perspective that can give you the wrong proof of concept.  In this case, I was assuming if I was in an apartment and the guy I was looking up to was living in a huge house, that his advice was superior and in my own self-interest.  It clearly was the wrong advice, and it wasn’t in my own long-term self-interest.  That doesn’t mean that the guy was intentionally trying to screw up my life. I don’t believe that was the case.  He just didn’t know any better for himself, nor did he understand the level of potential influence he had on a young mind eager for accomplishing what is supposed to be a big deal in life (owning a mansion).

Let me now share what I believe are the three biggest mistakes I see people make in their lives dealing with wealth. These 3 mistakes come from all the years of being a wealth advisor and seeing how things turned out over extended periods of time.

  1. Buy a house that is too expensive for your budget (usually with debt). This is one of the grand-daddy misconceptions of our culture and society.  We are brainwashed into thinking that the size of our home equates to a level of success (and happiness) in our lives.  Nothing could be further from the truth. When we allocate financial resources towards one thing, it means that those same resources can’t be allocated to anything else.  There is no bigger drain on our budgets than all the expenses related to buying and maintaining a large house.  Allocating too much towards housing just means that ALL other areas of your life are going to be sacrificed to some degree because you don’t have those financial resources to use in other important areas of life (vacations, children, hobbies, healthcare, and charity).
  2. Trade your health in the pursuit of more money. Chasing money takes effort.  Often, it takes a lot of effort.  It could be in pursuit of consistent promotions in the corporate world or the efforts needed to get a successful entrepreneurial endeavor off the ground and up to profitability.  That effort comes with trade-offs.  The more time, effort and energy dedicated towards money means it will be offset on the other end of the spectrum.  Working enormous hours in pursuit of more money means less sleep, more stress, more battles, less exercise, eating bad foods, using stimulants, less time with family, but most importantly a huge cumulative effect on long term health.  There is an abundance of people that have led their lives chasing money at the expense of their health only to get painted in a corner where they spend that wealth to recapture the lost health.  It usually ends terribly (and unexpectedly).  Without your health, the money means nothing.  Never trade your health (for anything).
  3. Ignore your personal happiness in the pursuit of additional wealth. There are several people that get so mesmerized by the allure of money that they sacrifice their own happiness to keep chasing it.  It’s rather odd if you think about it.  Why do people want the money?  To be happy.  You all want to be happy.  But you don’t really stop and ask yourself if you are happy along the way.  You just get your mind locked in on something and then it is full steam ahead while taking no prisoners.  It’s quite natural to want more money early in life (when we usually don’t have much).  Buying nice things or investing in experiences can be a wonderful thing that does lead to increased happiness.  But then you forget why you wanted the money in the first place and get so focused on the loot, that you forget the purpose behind the loot.  If you are like most people, you will never have enough money (no matter how much you have).  You’ll always want more.  The key is to enjoy life while you pursue personal excellence, be grateful for what you have, and appreciate the days while you have a chance to appreciate them.  They will end.  I promise.  Is money bad?    It’s not.  But living a miserable life is bad.

Good habits lead to good behaviors.  Good behaviors lead to good decisions.  Good decisions lead to a good life.  Live by principles and choose wisely.

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These are the EXACT same steps I used to PERMANENTLY get rid of my mortgage, student loans, credit card debt, and auto loan debt.

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