Connor Morganti, President of Johnson Morganti, Inc shows us some of the biggest money mistakes people make.
- Paying yourself 1st: Most everyone, whether you are a novice, median, or mature saver, does not understand this concept. Paying yourself first does not mean you go out and buy "stuff" before you save it or pay bills. Typically, the order of $ goes something like this:
- We get paid; originates from either a paycheck (w-2) or from owning a business (1099)
2 We pay taxes; either through payroll deduc, or through quarterly tax payments as a BO
- We buy things; spending all of our cash, then resorting to CC's
- We pay bills; necessities + revolving CC's for things we can't afford to pay cash for Which becomes a vicious circle.
- Then we save.
While this sounds about right, it's actually all backwards. We need to flip these around. Paying yourself first means saving first, then cover necessities, taxes and buying things last.
- Planning for Poverty: a common misconception that is being pushed by other financial professionals is that you will pay less tax in retirement, than you do currently. This is wrong in most cases. Also, most savers are randomly choosing different saving or investment strategies, just hoping something will stick. Which will get you nowhere. *There is much more here that we can dissect, but you get the idea.
3. Good Debt vs Bad Debt: Most everyone gets so laser focused on paying off debt, that they neglect to save. Based on what all the "financial entertainers" are telling you, you need to pay off all of your debt to be considered successful and on the right track for your future. I want you to question this line of thinking. Because what happens is most people will contribute the minimum to their 401k at work, while they’re attempting to pay everything down to $0, and having no money left over for themselves or their future. We can straddle the line between paying down debt + saving for the future if we identify the good debts vs the bad debts.