People make a lot of financial mistakes in their life because of not educating themselves financially or just being ignorant about their personal finances.
Such mistakes, which may be small or big can result in great financial hardships and would ultimately result in being broke or affect health.
So, it’s necessary to know the common financial mistakes that people make and to and to educate ourselves financially so that we don’t need to face any financial hardships.
Let’s look at the top financial mistakes made by people:
You might have heard it a lot of times and probably also know that you shouldn’t spend a lot on things that are not quite necessary.
Yet many people spend excessively without care. Remember that $1 dollar, Rs.1 rupee, €1 means a lot.
Don’t think that it’s only 1 dollar and it won’t make a lot of difference. These small expenses like buying coffee from Starbucks or eating from McDonald’s can make a lot of difference to your personal finances and can have a greater impact on your financial life in the long term.
A good habit is to track every penny you spend and going through it every month to check how much have you spent on the things that you could have avoided.
Tracking every penny will make you think twice before you go out to eat or buy that next coffee.
Using credit cards and taking loans to buy fancy things like expensive cars, luxurious houses, etc. is a very common mistake that people make.
People think that society will judge them if they don’t have a nice car or a nice house. The reality however is that people just don’t care! People are so focused on impressing the society that they forget how much they are burdening themselves with the credit card debt or the EMIs on the loans.
It’s important to think about the interest rates that you will have to pay which are quite high these days. Avoid depending on borrowed money as much as you can.
This is what most people do! They just wait for their next paycheck to arrive before they can pay their bills or cover other expenses.
When you are living paycheck to paycheck, you don’t know but you are just one step away from disaster. You just never know when the next pandemic or recession will hit you and you will be out of a job. That will be the worst scenario you can imagine.
Never depend only on a single source of income. Keep investing your money in various instruments like Stocks, Real Estate, Bonds, P2P Lending, Fixed Deposits, etc.
There are a lot of instruments where your money will work for you and a time will soon come where it won’t make a huge difference even if you are fired or your business gets shut.
In today’s world, if you are not investing your money, you are really out of the game of becoming financially independent or financially free. It was okay in earlier times if you didn’t invest as the interest rates on banks were high.
But at a time where banks offer interest rates of only 2-4% on average and inflation around 5-7%, you are actually losing money by keeping it in banks. It has almost become necessary for you to invest your money.
You have to educate yourselves and start investing every month so that you can retire early and retire stress-free.
You need to make a plan for yourselves on how you are going to spend your money, how will you repay your debt and how will you invest your money to achieve your financial goals.
Make a plan and then have the discipline and patience to stick to that plan no matter what happens. You can make the plan yourselves or can take the help of a financial advisor.
But make sure you have a plan or else you will end up being stuck.
It doesn’t matter if you have already committed one of the mistakes described above; it is important to accept your mistakes and learn from it to make sure you don’t repeat them.
There is no better time than “NOW” to start putting some time to make a plan for your personal finances.
Doesn’t matter whether you are a student, a salaried person, or a businessman, you should manage your money well.