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11 Of The Biggest Risks To Your Financial Success

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11 Of The Biggest Risks To Your Financial Success

Developing good financial habits is just as important as knowing what habits to avoid. While it is important to constantly learn from your mistakes, learning to avoid these mistakes ahead of time through financial planning is a much more effective route to take. Learn from the entrepreneurs who have been their there themselves, and the habits they have enshrined to guarantee that they live a life of financial freedom and abundance.

Andrew Woodward 
The Investors Way 
www.theinvestorsway.com.au

In my 20 plus years in financial markets and working with clients to build financial freedom, the single biggest risk to financial success is something that almost everyone overlooks. It is human nature to seek the quick big win. Most people are prepared to act on financial tips from someone less informed then themselves or to pursue financial success with just a small amount of knowledge gained from a book or a seminar they attended on the weekend.

Now there is nothing wrong with seeking to expand your knowledge before starting to invest and building financial success. However, what this highlights, and what my experience has shown, is that the biggest risk to financial success is YOU. You can have the best strategy, great knowledge and a good starting money balance. BUT, if you don’t understand what motivates you financially, how you will react under certain market scenarios, especially when losses occur, then the best strategy in the world will not be successful for you.

I’ve seen it so many times. I’ve had groups of clients, all with the same financial strategies end up with results that have varied dramatically. The only variable is the person implementing the strategy. The solution is to develop a strong understanding of your mindset strengths and weaknesses. Once you know these strengths and weaknesses, you will be well positioned to develop strategies to manage them. A strong money mindset is crucial to your success.

Levi Sanchez 
Millennial Wealth 
www.millennialwealthllc.com

The biggest risk to financial success is NOT investing. As the great Warren Buffett says find a way to make money while you sleep, or you will work until you die. His quote is telling, and coming from one of the greatest investors ever, shouldn’t be taken lightly. No matter how much money an individual may make, if they’re not stashing some away in investments that are going to outpace inflation over time, they’re likely not going to be
financially independent anytime soon. Especially over the last decade, as interest rates were near zero, people who held large amounts of cash earned next to nothing. Whereas people who invested in the stock market have experienced one of the longest-running bull markets in history. Taking risk, especially while you’re young by investing in the stock market is key to achieving long-term financnial goals. Waiting or avoiding investing, could be one of the biggest RISKS to financial success anyone could take.

April Davis 
Luxury Matchmaking 
www.lumasearch.com

While being an entrepreneur is a risk in itself, financially there are things you need to be prepared for. Many people have heard the saying don’t place all of your eggs in one basket and this analogy about risk applies to investing as well. Not only does that mean not having all your investments in one place, but also your revenue source. It is important to put your money in several investments with different levels of risk and potential return. The different options to invest in can include stocks, bonds, real estate and cash. The proportions vary based on your risk tolerance and investing time horizon. Each of these types of investments will act differently in the different market scenarios to ensure a lower level risk. Another important aspect to mention is your current financial structure. Depending on one person too much to create revenue for you can be detrimental to your business if they leave or downgrade their performance and stop bringing in promised revenue. It’s important to spread out your risk so you’re not too vulnerable if something happens to one of your key employees, the stock market, or anything else that could come up suddenly and unexpected.

Thomas Minter
City For Millennials 
www.cityformillennials.com

The biggest risk to financial success is that young people are not learning about personal finances at an early age. Teenagers rack up student loan debt and then enter into the working world without proper debt management strategies or personal finance goals.

These days there is a migration into urban centers for jobs with higher salaries, however, salaries are not keeping up cost of living increases. According to the United Nation’s 2016 World’s Cities report, roughly 54.5 percent of the world’s population live in cities. By 2030, it is estimated that urban areas will be home to 60 percent of people globally.

It’s going to get even more expensive to survive. A solution is to teach kids about money from an early age. Discuss with young adults to be mindful of personal finances, particularly on the three largest costs: housing, transportation, and food. If student loan debt exists, get serious about paying it back as fast as possible.

Nataliya Grygoryeva 
Araliya Valuation Consulting 
www.expertbusinessvalue.com

One of the driving forces behind financial failure is misunderstanding about personal abilities to take on and mitigate risk. Risk and reward are inversely related; however successful business leaders, entrepreneurs and investors understand the key to unlocking sustainable wealth is to take calculated risks while maximizing return. The road to financial success can be bumpy and requires agile mindset to deal with potential setbacks, while unlocking financial creativity. Failure to prepare and know how an investoror an entrepreneur will deal with cash outflows, lack of capital, growing debt, etc. will result in financial ruin. Oftentimes by nature, investors and entrepreneurs are more optimistic and confident individuals who are willing to assume greater risks. An honest reflection, answering “what if”questions beforehand and having an exit strategy will serve well to preventand mitigate arising challenges. Understanding one own’s limitations,weaknesses and areas of improvement is critical to future growth and success.

Scott Trench 
Bigger Pockets
www.biggerpockets.com

The biggest risk to financial success is cash flow. From a personal level, all the way up to the level of big business, the major risk is the same. You must spend less than you make, and continuously widen the gap between income and expense. Too many people think that investing is the key to success. Well, I’m here to tell you that if you save $1,000+ per month and steadily increase the amount that you save, then you will become wealthy.

Investing only impacts the degree to which you become wealthy. Cash flow is the real originator of that wealth. If you can, over the course of 5-10 years (or sooner if you are a hustler) get to the point where you can save over 50% of your income, you have excellent odds of becoming a millionaire, and a good shot at producing a $10M+ net worth over the course of a career.

A solid background in investing can help, but real estate, stocks, and many alternative investments can all produce acceptable returns and lead to wealth. But all that investment wealth may be a house of cards, ready to collapse, if you spend nearly all that you make.
The foundation of wealth is cash flow. Work to steadily increase the amount of cash that you accumulate each and every month and invest it according to a well-researched philosophy, and you will find yourself wealthy.

Stephen Hart
Card Switcher 
www.cardswitcher.co.uk

One of the biggest risks to financial success I’ve seen is the sunken cost fallacy. This quirk of human psychology suggests that our decisions are disproportionately influenced by the emotional investment we make into something rather than the cold hard numbers.

Say I spend five years trying to get a business off the ground. I invest hundreds of hours into it but it never seems to take off and there is no reason to think this will change. During the fifth year, I see an opportunity to launch a new business that will probably result in success.

I sit down and mull over the choice. Do I stick with my current business or jump ship to the new venture? With five solid years of work already invested, I’m reluctant to dump my existing business. I’ve put so much into it and decide to stick with it until it starts to pick up. This is the sunken cost fallacy.

I’m basing my decisions on the emotional investment I’ve made in my existing business rather than the potential future value of the potential business. Unfortunately, we’re all subject to this mindset and it results in people making seriously flawed decisions, which puts our financial success at risk.

Syed Irfan Ajmal 
Ridester
www.ridester.com

I am a serial entrepreneur, with all of the small businesses I founded being self-funded and profitable. I also write about entrepreneurship and marketing for Forbes, HuffPo, Business.com and other publications, and I speak on the same topics locally and internationally. Plus, I run a business podcast show as well. I’ve also been able to attain some decent financial success. No Lamborghinis, but I never wanted one!

In my view, the biggest risk to financial success would be not keeping a close eye on one’s income, expenses, and profits. Using something like a Google Spreadsheet or a mobile app to closely monitor one’s financial numbers (and associated KPIs which impact these numbers), it helps in 2 big ways:

Analysis of one’s financial data leads to valuable insights. This enables one to double down on things that help their financial success and remove things (such as depreciating assets) which harm one’s financial success Keeping track of one’s financial journey also enable one to stay focused on the ultimate financial goals, and avoid distractions and shiny objects which are not helpful in attaining those goals.

James Pollard 
The Advisor Coach 
www.theadvisorcoach.com

I’ve found that the biggest risk to financial success is surrounding yourself with the wrong people. There’s a world of difference between surrounding yourself with positive people who encourage you to do better and negative people who do nothing but pull you down. Achieving and maintaining financial success takes a lot of work, no matter what you’re doing. If you have people in your corner who are constantly pushing you to do more and become better, you will. When you do, the financial rewards will come. If you’re surrounded by haters and doubters, that negative energy will inevitably seep in.

Jacob Dayan
Community Tax 
www.communitytax.com

One of the biggest risks to financial success is waiting to start saving or investing. This is more specific to the young adult demographic, as they are often more focused on paying off student loans than they are on saving for retirement. While paying off your debt is an important step in setting yourself up for financial success, it is also crucial that you focus on long term goals as well. Contributing to a 401(k) or IRA is often overlooked or ignored, which can put you at risk for being financially unstable later in life. In order to avoid this risk, it is important to find the balance between paying off your debt, saving for an emergency fund, and making contributions to your retirement fund.

April Davis 
Luxury Matchmaking 
www.lumasearch.com

While being an entrepreneur is a risk in itself, financially there are things you need to be prepared for. Many people have heard the saying don’t place all of your eggs in one basket and this analogy about risk applies to investing as well. Not only does that mean not having all your investments in one place, but also your revenue source. It is important to put your money in several investments with different levels of risk and potential return. The different options to invest in can include stocks, bonds, real estate and cash. The proportions vary based on your risk tolerance and investing time horizon. Each of these types of investments will act differently in the different market scenarios to ensure a lower level risk. Another important aspect to mention is your current financial structure. Depending on one person too much to create revenue for you can be detrimental to your business if they leave or downgrade their performance and stop bringing in promised revenue. It’s important to spread out your risk so you’re not too vulnerable if something happens to one of your key employees, the stock market, or anything else that could come up suddenly and unexpected.

Nataliya Grygoryeva 
Araliya Valuation Consulting 
www.expertbusinessvalue.com

One of the driving forces behind financial failure is misunderstanding about personal abilities to take on and mitigate risk. Risk and reward are inversely related; however successful business leaders, entrepreneurs and investors understand the key to unlocking sustainable wealth is to take calculated risks while maximizing return. The road to financial success can be bumpy and requires agile mindset to deal with potential setbacks, while unlocking financial creativity. Failure to prepare and know how an investoror an entrepreneur will deal with cash outflows, lack of capital, growing debt, etc. will result in financial ruin. Oftentimes by nature, investors and entrepreneurs are more optimistic and confident individuals who are willing to assume greater risks. An honest reflection, answering “what if”questions beforehand and having an exit strategy will serve well to preventand mitigate arising challenges. Understanding one own’s limitations,weaknesses and areas of improvement is critical to future growth and success.

Clarissa Wilson 
Clarissa Wilson LLC 
www.clarissawilson.com

The biggest risk to financial success is not understanding your money belief system. Your money belief system is basically the set of rules that you have in your mind that tell you how to handle, make, spend, and save your money. Most of these rules are buried in our subconscious and these rules have caused automatic actions that we carry out every day with our money. And since most of us don’t understand this money belief system, there is no way for us to change it.

But when you understand your money belief system, you can always make changes and even create a completely new set of rules for your money. None of your money beliefs or actions are ever set in stone, but this is something that many people believe simply because we don’t know, understand or dig into our money belief systems. Our money belief systems can best be described as being similar to an onion. There is always another layer underneath. And the more you dig into the belief system that you have, the more you can change the belief system that you have built over the years.

For example, say you want to be someone who saves more money than you spend. But right now, you spend almost all of your money. Spending your money is a belief that you have and when you figure out why you spend all of your money the way you do, you’ll be able to change that belief so that you can actually start saving money. Most of the time, our beliefs come from the adults in our life when we were growing up. And we made their
beliefs our own and made their actions our own. And that is what we still do today. But you can change those beliefs so that you create your own belief system that isn’t based on the beliefs of the adults that were around when you were growing up.