Financial Pitfall One: Saving Money by Not Spending It

Some people believe that financial management is all about saving money, so they try to avoid spending and just keep accumulating their savings, thinking that the more they save, the more they will accumulate.

A friend once shared her story with me. When she first started working as a human resources clerk, she was quite frugal. After two or three years, she had saved nearly ten thousand yuan. At that time, she was very interested in learning interior decoration design and looked into several training institutions to see how long it would take and how much the tuition would be.

The information she gathered indicated that the tuition, along with the necessary living expenses during the study period, would be around ten thousand yuan. She wanted to learn, but the thought of spending all her savings at once made her hesitate.

Unable to make up her mind, she called her mother for advice. Her mother immediately responded, "Are you silly? You've worked so hard to save that money, and now you want to spend it all at once? You already have a good job; why do you need to learn something useless? Send the money back, and I'll save it for you!"

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My friend felt uneasy after hearing her mother's words, but she couldn't pinpoint exactly what was wrong. At that time, she was still young, so she eventually followed her mother's advice and sent the money back to be saved, forgoing the opportunity to study interior design. Later on, she went through dating, marriage, and having children, and her studies were put on hold. However, the regret of wanting to learn but not being able to do so has remained fresh in her memory, almost like a thorn in her heart.

Financial Pitfall Two: Speculation for Quick Wealth

Some argue that financial management is about making money grow, and since money doesn't reproduce on its own, it's natural to invest. But what should one invest in? The answer is often to follow what others are investing in and making money from.

The result, however, is that while others may have made a profit (and you might not even know if they really did), you could end up losing all your capital. You might have dreamed of getting rich overnight and achieving financial freedom in a few months, only to find yourself suddenly drenched in cold water on a winter's day, metaphorically speaking, as you lose your investment.

You see others making money from stock trading, but you don't see the decades they've spent navigating the ups and downs of the market. Now that the right opportunity has come, they've taken off. You only see their gains and, without understanding the risks, you impulsively invest all your money, only to become the "chopsticks" in the market, fresh and tender.You see others making money from real estate speculation, but you haven't noticed when they got involved. Now that housing prices are soaring, you still resolutely exert great effort and use various loans and high leverage to enter the market. After getting involved, you suddenly realize that you are immediately trapped. There are many tax expenses, high holding costs, and you can't make a profit or sell at a loss. Various policies are constantly being introduced, which makes you feel nervous and afraid that any mistake might lead to a financial collapse.

After all the trouble, your money doesn't breed more money, but instead, it becomes less and less, and you feel like you're on a roller coaster, experiencing stimulation round after round, and getting sick and creating many problems.

Avoiding Pitfall Guide One: Financial management requires the correct consumption concept.

Financial management is not about not spending money at all, but about spending money correctly. You should spend when you should, without hesitation. Take the friend in the previous text who wants to learn design as an example. She has been working for a few years and has accumulated some money, which is actually very good. Why? Because she wants to learn interior design, and the money she has on hand can pay for her tuition at that time. If she hadn't saved any money in those years, she probably wouldn't even think about it. The current problem is whether to continue saving the money or to pay for her tuition.

She has done a lot of preliminary understanding and preparation for the thing she wants to learn, but she is stuck with the money, feeling that the tuition is a bit high and a bit reluctant to spend it.

Is it important to learn more skills and improve yourself when you are young? It is very important. And you have the ability to pay the fee, what a good thing, the savings of the previous few years can really come in handy, if you understand this truth, you probably won't hesitate.

Financial management is just a means, not the end, the end is: our life will become better, the happiness index will be higher, and we will have the corresponding ability to pay at any time when we need it.

The general direction of a person's life is actually divided into several stages, each with different focuses.

In the first few years after graduation and work, the most important thing is self-improvement, learning more skills and charging more. Around the time of getting married, you need to prepare some family assets and live a family life. After having children, the cost of raising and educating children will account for a large proportion of the family's expenses. Later, when parents are old, you also need to prepare some assets for the health expenses of the elderly. After that, it's your own pension fund reserve.The financial expenditures required at each stage may utilize your original savings, which is very necessary and meaningful, as it can greatly increase your life happiness index. Generally speaking, things that enhance one's happiness index are always worthwhile. Saving money is not about keeping it idle in your hands, as that deprives money of its intended purpose.

Avoid Pitfall Guide Two: Wealth management requires a steady and scientific approach

Wealth management is a long-term, gradual accumulation process. Generally, we should first set aside about six months of family expenses from our spare funds, followed by about one year's worth of major expenditures, such as planned home or car purchases, or having a baby, which are funds needed in the short term and should not be used for risky investments.

Money that can be kept untouched for 2-3 years can be invested, but it should be divided into two parts: one focusing on returns and the other on capital preservation and safety. The general ratio is 50%:50%, but it can be adjusted according to your age, income, total funds, and risk tolerance, such as 40%:60% or 30%:70%.

Avoid putting all your eggs in one basket by gambling all your funds on the same high-risk project in the hope of a one-time success. The chances of success are very slim, while the consequences of failure can be disastrous.

There was a little joke about the power of compound interest: A pond had a small patch of duckweed, which doubled in size every day, and it was estimated that it would cover the entire pond in 10 days. How many days would it take to cover half the pond's surface?

The answer is: 9 days. It takes 9 days to cover half, but by day 10, it covers the entire pond.

Proper wealth management is not about achieving success in one step, but rather about a steady and scientific approach, leveraging the compound interest effect of time and funds to maximize benefits.

For the products you are about to invest in, you should do your homework beforehand, understand the ins and outs of the product, and judge its profitability probability. Avoid blindly following trends or echoing others. Instead, accumulate relevant knowledge and gradually establish your own investment value system.If you do not manage your finances, they will not manage you; but if you do manage your finances, you must also learn. The correct perspective on financial management is also a healthy and uplifting lifestyle, with more learning, more effort, growth, and rewards.