8 ways to avoid ruining your financial life

Follow some basic guidelines to avoid financial ruin.
Follow some basic guidelines to avoid financial ruin.
(Ulrich Baumgarten / Getty Images)

There’s a simpler way to build wealth than guessing which stock will be the next Google or Apple: Don’t make colossal financial mistakes. It’s simple, yes, but unfortunately, it’s not necessarily easy. Although you can’t prepare for everything that could go awry, there are some mistakes you can work hard to prevent.

1. Just say no

Don’t drink to excess, don’t gamble to excess, don’t do drugs and don’t cheat. Simply avoiding potentially costly problems and behaviors makes it easier to stay on the right path for your finances.

2. Invest like you earn

It probably took a lot of time, discipline and hard work to get to where you are in your career. The same is true of investing. It’s a long-term, disciplined process. So if a particular investment opportunity crosses your path that promises the moon and seems way out of the norm, it’s likely not an investment worth making.

3. Don’t get divorced

I say this tongue-in-cheek, because it’s not as if you should stay married for financial reasons, but there’s no question that divorce can derail your financial life. For example, say you divorce at age 40 and need to divide your assets in half. At that point, you have just two doubling periods before age 60. You’ll be 50 by the time you break even, given that hypothetical 7% annual return, which you may or may not receive.

4. Don’t sell the gas station

I’ve seen more than one person make millions in their business, cash out, spend it all and then find themselves trying to build anew from square one. If you have a reliable source of income, maintain that “gas station.” You’ll have the security of knowing you have a backup source of fuel.


5. Mind your spending habits

If you let excess spending become a habit, it becomes a major threat to your financial life because you’re living right at the limit of your income — or perhaps past it, if you get into credit card debt. Before you click “Add to cart,” ask yourself, “Do I really want this or am I just bored?”

6. Keep things special

There’s nothing wrong with enjoying a celebratory five-star meal with a fine French wine. But regularly enjoying that same bottle of wine with the mac and cheese can become a problem. Keep certain luxury items a rarity so they remain special and don’t become a recurring line item on your budget.

7. Don’t take on long-term financial commitments based on a short-term windfall

It’s good to be optimistic about the future when you get a big bonus. But understand what’s sustainable — earn first, buy later. Don’t take on a third car payment or buy a vacation home solely based on your success in one year.

8. Keep dreaming

It’s important to focus on the positive. You need to believe you’re worthy of financial security if you want to achieve it.

Ted Halpern is the president and founder of Halpern Financial, an independent, fee-only wealth management firm with offices in Rockville, Md., and Ashburn, Va. He is an advisor at NerdWallet, a personal finance website.