Experience is the best teacher. But why wait to learn from your own experience while you can pick the lessons from other people’s experiences? Well, if you are like me, then you know making money is awesome. Spending it is way gratifying. However, with poor management, your hard-earned money can be flushed down the drain with only one snap of a finger. After intensive research, I discovered that money is a game of numbers, and if calculated well, you get to enjoy its benefits. Money can either be a slave or a master. A rule of thumb: If you bleed money more that you make, then you are a slave to money. However, if you make more money than you spend, then money becomes your slave. In this article, we will bisect ten common money mistakes to avoid.
“What is done cannot be undone, but at least one can keep it from happening again.”-Anne Frank. Money management entails more than just making money to yield the highest interest. It also involves budgeting, saving, investing, spending, and tending to your debts. Spending without planning causes financial stress and eventually leads to depression. To set yourself free from financial insecurities for the rest of your life, try avoiding the following common money mistakes.
Have you ever thought of the consequences of not budgeting?
Definitely yes!! If not, this is the time.
When it comes to personal finance, a number of negative outcomes can result from operating without a budget. These outcomes include, but not limited to, overspending and going into debt.
Planning how to spend your money brings clarity on whether your priorities are right regarding how you spend money.
Disregard towards savings
From the word go, saving money is essential when it comes to financial discipline. This is because it covers you during a financial crisis. Additionally, saving money can help you pay for large purchases, vacations, college education, avoid debt, and ensure a sense of financial freedom.
It is always advisable to save money for a longer time, which in return will accrue interest and the savings will see you through old age. You can begin with 10 to 15 percent of your monthly income as early as in your twenties. Thank me later.
Not having insurance
Life is full of uncertainties. The future is forever unpredictable. And for that reason, setting some money aside to protect us from the uncertainties is a good idea. Life insurance is important: it protects your family and lets you leave them a non-taxable amount at the time of death, it covers your mortgage and personal loans, and your individual life insurance follows you when you retire and no longer insured by your employer.
When you are young and healthy, it is tempting to go without health insurance. But when medical problems suddenly emerge and the cost is too high to bear, that’s when we wish we could have a medical cover. Health insurance is very important as it caters to medical emergency bills which can pile up and leave you bankrupt.
It may seem hard to make it between paychecks due to unexpected expenses. Buying unnecessary goods with no prior planning beforehand or no hard thoughts put into the decision, makes you go off the budget. You should ask yourself, “Do I really need this or do I just want it because it is on sale?” Here are some ways you can put into practice to stop the impulse buying habit:
make a grocery list,
avoid shopping when angry or stressed,
try paying with cash and not credit cards.
Bad debt is anything that does not improve your financial situation, which includes personal bank loans, credit loans, and automobile loans. As much as at one point in life you may require to obtain a loan to meet a certain need. It is not a good idea to go into long-term debt to make your dream wedding which will only last a day or buy a fancy car that will depreciate the next minute. Instead, invest that money in buying land, educating yourself, something that will eventually add value to your life.
Spending more than you earn
The frequency of spending more than you earn is the easiest way to accumulate debt. To avoid incurring debts, you will have to find a way of spending less or earning more. It is always good to live within your limits. Spending habits should be based on how much you decide to save monthly. For example, if you make $30,000 monthly and you want to save $10,000 of that, then all you need to do is figure out how to live off of $20,000.
However, my best advice would be to find new ways of making more money if you wish to spend more.
Not setting financial goals
Building wealth is a process. Time is not all it takes. There is also a need for financial goals. Setting financial goals is essential for financial success. They can be long terms like starting up a company or short term like paying off debts. Once you have set the goals, it can help you stay focused and work towards accomplishing them.
Not having an emergency fund
Emergencies can happen to anyone, at any time and any age. It can be losing a job, having to repair a crashed computer, or even sudden death of a family member. Soaring through all these can be hard with no emergency fund in place. An emergency fund can protect you through unforeseen circumstances and give you peace of mind in such stressful situations. Just like savings, you set up an account kitty for emergencies where you deposit a certain amount of money each month.
Not taking free time to make extra money
It is advisable to have other means of generating money aside from your salary. Instead of spending your free time to: watch tv all day, attending unnecessary meetings, constantly updating your status on social media, etc., it is wise to put the time in to make extra coins. It can be working online as a freelancer or boosting your side hustle. Making extra money, in the long run, can help you stop living from paycheck to paycheck, pay off your debt, save for big purchases, and get you to enjoy vacations.
Not discussing finances with your partner
Most couples find it difficult to talk about money. But if you decide to let someone be part of your life, then it’s time to have the talk. Have open discussions concerning your views on money and work on coming up with financial goals together. It can be planning to make big purchases, investments, children’s education, saving for retirement, etc. Dividing money-related tasks between you and your partner will not only make marriage life smooth but also make you enjoy every bit of your financial life.
It is never too early or too late to start embracing the right ways to manage your money. The sooner you start avoiding the common money mistakes the better. All the best!