Many people have gone from broke to multi-millionaire by following some simple concepts that allow anyone to move from debt to wealth, on any income. One thing you will note about the following money mistakes; they deal more about attitudes, beliefs and values, versus failing to review a restaurant receipt for errors.

1. There is no reason to track my cash spending because it doesn’t add up to enough money. People have the attitude that small amounts of money are not important, only large amounts of money are important. They will not be concerned about how invest hundreds of dollars, but only thousands of dollars. They will think nothing of spending $5 on a cup of coffee and a muffin at Starbucks when they can make the same things at home for 50 cents. The fallacy is you can’t get to the large amounts of money to invest if you spend all the small amounts. You must have respect for the small amounts too. Over a 30-year time frame, $5 per day can create a $1,000,000 portfolio when invested appropriately.
Solution: Use a small notebook or spending register to track all cash spending. You cannot change behavior you are unaware of. Create awareness by tracking your cash spending.

2. Emergencies always show up and ruin my savings goals. In studying the spending habits of thousands of people for more than 10 years it was discovered that many people live on 105% to 115% of what they earn. They didn’t plan for a vacation, back to school clothes or for the car to break down. But it happens, and when it does people turn to their credit cards and the balance grows and grows.
Solution: In addition to saving for retirement, set aside 10% of your income to spend later on the emergencies you didn’t plan for that will happen anyway. This will also cover back to school clothes, vacations, and even property taxes.

3. Credit cards are more convenient than cash or checks. This is one of the most frightening mistakes many people make. They operate unconsciously when it comes to using credit. They think that someday, magically, they will have enough money to pay off their credit card debts. Unfortunately, even if they refinance their home, get an inheritance or win a lottery and pay off the credit cards, the debts only come back again. Getting the money from anywhere other than systemically paying off the debts teaches nothing about how to get rid of debt. It only teaches them that they can get another family gift or a consolidation loan.
Solution: Drop the credit cards cold turkey and live the lifestyle of “pay as you go.” Use the money you set aside for emergencies to replace the times when you would have used a credit card. Also, wake up and realize the credit issuers are not your friends. Their advertisements are designed to put you in bondage, not provide freedom. Ads to borrow money against your home to go on a vacation is crazy.

4. If I just made more money everything would work out fine. This is one of the biggest lies we can tell ourselves. Just like an alcoholic can’t get enough liquor or an overeater can’t get enough food, more money will not solve a problem of over spending. Things work out fine when expenses are addressed first, and figuring out how to increase your income is addressed second.
Solution: Start by listing your fixed expenses, like mortgage or rent, car payments and insurance. Next, list your variable expenses, like food or utilities. You will have these each month, but the amount will vary. Finally, list your discretionary expenses. These are the items you have complete control over like entertainment, clothes, meals out or vacations. When you include the items that don’t show up every month, like taxes or auto repairs, and convert them to a monthly amount, you will have a picture of your total monthly expenses. Now make this smaller than your monthly income and also factor in regular monthly savings.

5. Rich people don’t have to budget. I shouldn’t have to either. This is just plain false. The richest people in the world know where every dollar goes that they spend. If you saw someone jogging down the road, and they looked like they were in ideal physical shape, you wouldn’t say, “They don’t need to exercise. They look great.” You know that is how they got in good shape, and that is how they stay in good shape.
Solution: Read any biography of the richest people in the world, from John D. Rockefeller to John Paul Getty, and you will see they knew about every expense that they had. They made sure they made more money than they spent, and they invested wisely and took calculated risks that they could afford to take. Warren Buffet has an annual income of about $120,000 per year, but he’s worth billions.