Common Mistakes

Excerpt Adapted From: The Financial Shepherd®
Why Dollars + Change = Sense by Glen Wright and Sy Pugh

I am a huge supporter and advocate for quality education at all levels. In fact, out of all four categories of expenses, education is where I believe one should give the most or make the most sacrifice. Growing up in good schools and nurturing environments certainly gives a great advantage to a child. Also, the difference in earning potential between someone who earns a high school diploma versus someone who earns a college degree is staggering. At the end of the day, investing in education almost always yields the highest return. However, just like everything, there must be limits and guides for moderation. I have seen parents over-do it in this area also. Just to make a social statement and keep up with the “Joneses,” I have witnessed parents enroll their child in “the” private school in the city even when they were totally incapable of paying for the tuition costs. In one particular instance, in spite of a great secondary private school education, the child still ended up going to a community college because the parents didn’t have enough money to send them to any other college. How backwards is that? There was an excellent, award-winning public school in their neighborhood where the child could have attended for free, yet the parents chose to bankrupt the family just to keep up appearances. They ultimately ended up sacrificing their child’s opportunity to obtain a higher-quality, post-secondary education.

Another common money mistake that most people make is operating their household without a budget. Budgets work! Everyone needs a budget, because it is part of the basic foundation in a successful financial plan. Whether you make $10,000 per year or $10,000,000 per year, you must be a good steward over the talents and treasures that you have been blessed with. Successful financial management is not about how much money you make, it’s about how much you keep, invest, and grow.

We’re often asked about co-signing on loans for friends and family. Again, this is another huge money mistake that a lot of people make. Although everyone starts out with good intentions, nothing tends to complicate a relationship quicker than misunderstandings about money. Co-signing is a big no-no unless you are willing to cover the entire loan and simply give away the money. If you are not willing to do that, then do not put your name on the loan papers. I also do not encourage lending money to family and friends; instead, you should be willing to give it to them and forget about it. I have seen many families and friendships break up over a $100 loan. It’s simply not worth the headache; just say NO.