It is important to note that everybody is susceptible to making mistakes. Regardless of your position in life, whether you are an MBA graduate of an Ivy League School or a pottery grocery trader, mistakes are inevitable.
The mistakes people may make when dealing with money may have lasting effects on them. There is a chance that you have made or are making such a mistake and if so you must take some form of remedial action and ensure you don’t do it again.
It is not only about getting the right knowledge but taking the right steps based on the available information.
Let’s take a closer look at these five money mistakes you should avoid.
Being too frivolous
One thing we need to understand is that our lifestyle choices can either make or break us in our quest to achieving financial success.
There is nothing wrong with having fun or buying some expensive items or taking costly vacations now and then. However, moderation is the way to go. You don’t have to buy an Armani bag simply to impress your mates.
It may temporarily boost your ego, but there may be some serious financial consequences.
You need to understand that it is better to buy cheap things and have a debt-free life than having expensive things and suffer a serious debt load.
Do not buy things just because they are expensive. People have this erroneous idea that if a product is costly, it is because of its superb quality. Most of the time, it’s because people are willing to pay so much for it not necessary because it is of excellent quality.
This is not to encourage you to buy the cheapest things on the market. Some of these cheap items do not last for long. For example, you buy a pressing iron for $5 because it is cheap. Two months down the line, it’s defective, and then you have to buy another.
Spend your money wisely and buy an iron that’s good and durable.
Associate yourself with people that will encourage you to save, invest wisely and discourage you from taking the bad financial decision that may derail you from your path to financial stability.
Trusting bad advice
Have you noticed that there is always this friend or relative, always giving you advice on what to do with your money like advice on how much to spend on groceries or what company to invest in or what percentage of your income should go for charity?
It is not exactly wrong to take financial advice from a family member or a friend, but we must be wary of whom we receive financial advice from. You should seek expert opinion and or read books and blogs by financial experts.
Remember that there is no one-size-fits-all solution to this. You may be from a different country, age grade; job, etc and so not all the principles that worked for your advisor may work for you.
You must find what suits you.
Some other people find it difficult to seek knowledge about financial matters from others more knowledgeable and experienced.
They do not want to appear clueless. Hence, they go bumbling from one financial fiasco to another.
Not being well informed about an investment before making a decision is a straight line to the poor house.
Apart from getting expert advice, strive to continually upgrade your financial intelligence by reading and researching established thought leaders in personal finance. There are so many quality blogs, like this one, that distills sound, bite-sized advice that will help you to get a headstart on your path to financial freedom.
Delaying to pay your debts
Many people are struggling with debt. Some people carry credit card balances from month to month. This habit will keep you in debt for an indefinite period. Unfortunately, delayed debt payment will cause you thousands of dollars as you will have to pay for the interest charges plus you may end up paying double or triple of the original sum.
It is necessary to pay up your debt once the demand arises. Also, you should try to negotiate for a lower interest rate. Card issuers are likely to lower your interest rate if you have a history of paying on time.
Some will even waive late payments fees. They won’t do that if you don’t ask. In conclusion, accumulating debts is not good for your financial health.
Depending on one source of income
If you are someone who is only relying on one stream of income, you are putting yourself in danger. You are entirely at the mercy of your employer, and if anything happens to that source like you got laid off or your company gets bankrupt, you will return to square one.
In the event of a job loss, living off your savings solely will drain it in no time.
A side hustle that can boost your income will be of great help in times of job loss. Having multiple sources of income will also give you more confidence and relieve the stress of thinking about losing your main job.
More income will help in achieving your financial goals faster.
Not having any or enough savings
Definitely emergencies and unforeseen expenses are bound to arise in the future. It is therefore essential to start saving for the rainy day to cushion those bad days.
In the book, Richest Man in Babylon, we are advised to pay ourselves one coin for every nine coins we earn before paying any other bill.
This is a great technique if you want to stay afloat.
To achieve this, you can find an automatic way like setting automatic transfers with your bank. Another method of saving money is for you to budget and find ways to stick to it. As part of the budget, you must allocate a certain sum for savings each month. If you wait until the end of the month to save, there might not a substantial amount of money to keep.
Despite our best efforts, money mistakes sometimes do happen. It would help if you learned from them and quickly move on determined not to slip again. Your financial health could be dependant on your ability to avoid these 5 common mistakes.