Faux Financial Security: 3 Money Mistakes to Avoid

There are a few things in life that are just better when they are faux: lashes, spray tans (no thank you, skin cancer), and fur coats.

But there are a few things we can all agree on that do not make our lives better when they are fake: designer handbags, friends, and financial security.

A false sense of financial security is easy to come by. This could be due to lack of information or as a result of us lying to ourselves when we do, in fact, know better.

Style tip: Wearing an ostrich feather-adorned frock is much more enjoyable than sticking your head in the sand like said bird to avoid your problems.

Faux financial confidence is often seen in the Fool – one of the 8 money “archetypes” explored in my money coaching process.

Curious to know your money archetypes? Take the free money type quiz.

In fact, the importance of understanding our money archetypes to avoid financial faux-pas was recently featured in Kiplinger. Read the full story here.

Ignorance is almost always not bliss – especially when it comes to money.

Intentionally ignoring or choosing not to improve your financial health will lead to a false sense of financial security – resulting in not so #fiscallyfabulous money decisions.

Today I’m going to help you avoid 3 mistakes that could prevent you from building genuine confidence around your money – with the receipts to back it all up.

1. Not knowing the interest rates you owe and earn

Addressing the balance between debt and equity in your life is a crucial step in building financial confidence and security.

I often get asked the question, “Should I be investing while I still have debt?” The answer is…maybe.

Compound interest can be your best friend. It can also be your worst frenemy.

I’m here to help you determine which one you’re dealing with.

I talk more about the magic of compound interest (even Albert Einstein is with me on this one) in one of my most popular articles, “Why Compound Interest is Better Than a Birkin Bag.”

If the interest rates owed on your debts are higher than the average interest rates earned on your investments, you aren’t actually making any money. This is faux financial confidence at its core.

Rather, you are eating into your future investment returns and ultimately losing money. So, it makes more sense for you to focus on paying down debts before further contributing to investment accounts. Remember, this is a marathon, not a sprint. With a little patience, discipline, and looping in someone like me to help, you will get there!

Style tip: If you want a head start, follow my proven, 4-step process every payday.

However, if the interest rates owed on your debts are lower than your average investment returns, let’s take a deeper dive.

Basically, the amount of money you would save by paying your loans off early would be less than the investment returns you could earn over that same time period. You could potentially be leaving money on the table!

But it’s important to note that this solution is not for everyone. For some, it may be more important for their mental and emotional health to not have monthly loan payments looming over them – regardless of the interest rate they are paying. You must weigh the opportunity costs and trade-offs relative to your unique situation.

Want help determining which strategy is best for you? I’m here to help – shoot me a note!

2. Not tracking where your money is going

How many times have you looked at your bank statement wondering…

“Where in the world did all my money go? Surely there must be some mistake! I’ve been hacked!”

But to your dismay, all receipts lead to your recent trip to Bloomingdale’s.

I know first-hand the anxiety, stress, and frustration that can go along with such an internal dialogue. It can make us overly self-critical and cause us to stay in a loop of repeated money mistakes.

Even if you still have plenty of money in the bank, but choose not to pay attention to your cashflows, you are giving yourself a false sense of financial security.

Style tip: To be truly financially secure, you must have awareness of and control over your money flows.

When I’m helping clients through what is traditionally referred to as building a “budget,” we use this powerful, mindset-shifting phrase instead. It can make all the difference in helping you bring about sustainable, healthy money habits and genuine financial confidence.

3. Only treating your money mistake symptoms, not your underlying problems

This sneaky money mistake is the most common culprit of them all. It is also the mistake I see many personal finance tools and resources gloss over entirely.

Filling out a budget spreadsheet, putting your credit cards under lock and key, and saying “no” your morning latte can seem like quick “fixes” for your money problems.

Spoiler alert: Ditching your latte will not make you wealthy – here’s why.

These activities may make you feel confident and secure in the moment. However, they do not address the root cause of your challenging money behaviors. They only treat your symptoms – which, in the cases of the afore-mentioned examples, are likely overspending and impulse spending.

So how do you avoid this major money mistake?

If you don’t understand the “why” behind your money habits, cutting up your credit card will yield faux financial confidence – and minimal, if any, changes to your behavior.

Instead, I recommend taking the time to reflect on your money mistakes. Start by asking yourself questions like, “How did I get to the point of needing to cut up my AmEx in the first place?”). This will give you newfound self-awareness to be able to recognize when challenging money behaviors show up in your life.

A great way to bring your money behaviors – both positive and challenging ones – into focus is through journaling. I share several prompts to get you started here. These journal prompts are useful for reflecting not only on your relationship with money, but on your career aspirations as well.

I want to note that it is very important to not pass judgement on yourself when reflecting on your money habits. If you are too busy judging and criticizing yourself for not being where you think you should be financially, you don’t have time to love yourself and bring about sustainable, healthy financial progress!

In a world full of faux, be authentic – especially when it comes to money confidence. What are some additional ways to be genuinely financially secure?

Xx, Faith