Managing your finances is tricky, and it’s easy to make costly errors. In a YouTube video for CNBC Make It, Kevin O’Leary — businessman and star of ABC’s “Shark Tank” — outlined key money mistakes people should avoid.
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Here are the common financial mistakes he highlighted.
Not Taking Advantage of Side Hustles
If you’re struggling with your budget and need extra money, starting a side hustle is a great way to increase your income. Side hustles are typically more flexible than full- or part-time jobs, allowing you to fit them in alongside your primary source of income.
In the video, O’Leary highlighted online side hustles, specifically being a digital assistant, as powerful opportunities for earning extra money. He referenced the different problems people need help with, like editing documents, sales work and customer support. Using just a laptop, you can connect with these people and build a business solving their problems.
O’Leary emphasized digital assistants’ ability to set their own rates, perhaps ranging from $60 to $100 per hour, to do this work: “You’d be amazed how many people are looking for help like that. It’s a big business for those who have the guts to get out there and start selling themselves as people that can solve problems.”
Other side hustles you can pursue include:
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Freelance writing
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Pet sitting
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Graphic design
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Social media management
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Translating
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Online tutoring
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Personal shopping
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Delivery driving
The key to building a meaningful stream of income through a side hustle is marketing yourself. Choose something that interests you and that there’s a demand for, and then get the word out that you’re available to do the work.
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Waiting To Start a Business
If you’re waiting for the perfect time to start a business, you’ll probably wait forever. Adverse factors will always be in play, but that shouldn’t prevent you from pursuing your business ideas.
“People ask me every day, ‘Is it a good time to start a business?’ My answer is yes,” O’Leary said. “There is so much opportunity in chaos right now.”
In the video, which came out in 2020, he noted that these new businesses probably wouldn’t use retail stores for the primary distribution of their products or services. Instead, he emphasized direct communication and sales to customers through technology.
Sometimes, people put off launching their businesses because they don’t know where to start. The exact steps will vary depending on the kind of business you want to launch, but most online businesses can be started in six easy steps. O’Leary recommended taking advantage of the available opportunities and starting your business right now.
Not Saving Enough for Retirement
According to O’Leary, the absolute biggest money mistake people make is not putting at least $100 toward their retirement savings weekly: “That’s the minimum number you have to apply. Put a hundred bucks aside a week, put it into a diversified ETF and let the market do its thing. By the time you retire in your mid-60s, you should have about $1.2 million sitting there.”
However, inflation, stagnating wages and other budgetary concerns can be obstacles to saving this much money every week. The majority of workers in the U.S. wouldn’t be able to afford a $500 emergency expense without going into debt, which suggests saving $400 for retirement every month would be a significant challenge.
“Everybody can save a hundred bucks a week,” O’Leary asserted. “If you’ve got a job and you’re getting paid only $30,000, $40,000, $50,000, don’t spend on something you don’t need.”
Finding areas in your budget where you can cut costs can help you free up some money to save for retirement. Alternatively, you can try to increase your income and put the additional funds toward your retirement savings. The sooner you start saving for retirement, the more time you have to take advantage of the power of compound interest to grow your money.
Not Prioritizing Debt Payments
Another financial mistake O’Leary sees people making is not prioritizing their debts before other spending: “If you have student loans, if you have credit card debt, if you have things that you’re paying interest on, you have to pay those off first.”
When you have consumer debt, those interest payments can eat away at your income and make it much more difficult to reach your financial goals. Spending money on luxuries before tackling this debt doesn’t make much financial sense. The longer you take to pay off these debts, the more you’ll end up spending on interest payments.
Say you have $1,000 of credit card debt with a 25% interest rate. If you spend $100 on new shoes you don’t need, that purchase costs you more than just $100. If you had put that $100 toward paying off your debt instead, you would have saved $25 in interest. Everything is more expensive when you’re carrying interest-bearing debt.
“The key is to get out of debt first,” O’Leary said. “You can buy that extra thing you want after you pay off your debt.”
The common factor between these money mistakes is not being intentional about your financial goals.
Take some time to think about what’s most important to you with your finances. For example, you may want to gain more financial security or you may want to retire in the next 10 years. Whatever your financial goals are, it’s important to outline the steps you can take to make them a reality.
Examine your finances as they stand right now and compare them to where you’d like to be. If financial security is your goal, for instance, working toward building a sufficient emergency fund is a great path forward. Consider the common financial mistakes that Kevin O’Leary highlighted so you can avoid costly errors that will get in the way of your goals.
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