Everyone makes mistakes from time to time, but when those errors are financial there can be serious repercussions. If you invest your own money in the wrong way and end up losing it, how do you get back on track? Bad financial decisions often come about due to poor judgement or lack of research. They can hurt you in the short term, but in the long term they can offer valuable lessons to remember later down the line. Even some of the biggest companies and entrepreneurs in the world have made blunders at some point.
Why do People Make Bad Financial Decisions?
Poor financial decisions range from buying lottery tickets instead of saving to pay off debts, to taking out high-interest payday loans to fund items that are completely unnecessary. Anything that puts you in the position of owing more money than you are bringing in could be considered to be a financial misstep. Failing to budget correctly or buying things out of your price range also fall into this bracket.
There are numerous reasons why people make poor choices with their finances. According to a report from the World Bank, working a low-income job is one major reason. Those who are at the poorer end of society feel that saving a small amount each month is getting them nowhere, and instead search for quick fix results like a lottery win. Another major factor is a lack of self-control, often referred to as failing the marshmallow test. In the 1960s, a famous study by Stanford University gave children the choice between eating one marshmallow straight away or two later on. Those who chose to eat one were people who needed instant gratification and displayed a lack of self-control. These types of people can later go on to make rash financial choices.
Often, poor financial choices come in the form of investing in the wrong company. If you want to try to make your money work for you by buying shares, use reliable sources such as Investopedia for tips.
Even Huge Businesses Make Mistakes
It’s good to take some comfort in the knowledge that bad financial decisions can happen to anyone, even the best business-minded people in the world. In fact, looking at some mistakes made by people at the top can reassure you that you aren’t alone in your own financial blunders. In some cases, the businesses have continued to thrive, while in others, the mistakes have had devastating consequences. Looking at these cases can provide some valuable lessons for small investors and businesses alike.
Hindsight is a luxury that could have saved numerous businesses from disappearing into nothingness. Blockbuster, for instance, was once the world’s powerhouse for movie rentals. At its peak, it had over 4500 stores across the United States prior to its shocking demise into bankruptcy. But this may never have happened if the video rental company had joined forces with Netflix, the streaming service which is now listed by Forbes at around $150 billion. To make it even worse, according to Betway Casino, at the turn of the century, Netflix offered Blockbuster the chance to become a partner, but it would have cost the established rental giants $50 million. If the company executives could go back to that moment in time now, they would pounce on the offer.
Not all wrong decisions spell the death of a company, however. In 1982 Mars made a dreadful mistake when they declined the chance to be used in the advertising for the Steven Spielberg classic E.T. Reese’s Pieces agreed the $1 million deal which is estimated to have earned the company $20 million worth of exposure. The loss of revenue didn’t hurt Mars too badly, though, as the confectionary company still rakes in around $35 billion per year.
Learn From it and Change your Strategy
If you have made a poor financial decision in your life, the first thing you need to do is stop beating yourself up about it. As noted above, it happens to everyone and you are not alone. Just because you made a mistake once, it doesn’t mean that it will be detrimental to your future. Forget about what went wrong and think about what can go right. Look to the future instead of the past. Learn from your mistakes by being wiser moving forward. Another thing to remember is not to let fear of making errors get in your way. Be bold, and if you end up making a mistake, remember that you will learn from that one as well.
Poor financial decisions occur for a number of reasons. Everyone should be aware of how they can come about in an effort to prevent them from happening. However, if you find that you make an error with your money, you need to try to learn from it and move on.