Common Money Mistakes We All Make
If you constantly feel like you are making one money mistake after the other, you can rest assured that you are definitely not alone in this regard. Virtually everyone is guilty of either ignoring existing debt or overspending on luxury items at some time or other. Below are some of the most common mistakes people make with their finances.
Ignoring Financial Matters
If you are in debt, it’s too easy to adopt ostrich mentality (bury your head in the sand) and hope that the problem magically goes away or resolves itself. However, this will make matters worse, which is why you will need to address the issue directly.
Start by calculating exactly how much debt you have and develop a repayment plan. If you want to repay your debt as quickly as possible, you will need to reduce other expenses such as your entertainment budget or forego your long holiday in favour of a shorter camping trip. Money saved in this way can then be put towards getting your debt paid as soon as reasonably possible.
You Aren’t Working with a Budget
Not having a budget in place is a surefire recipe for financial failure, as you will not be able to determine where your money is being spent. It can also result in embarrassing situations in the shops if your card happens to get declined when trying to make a purchase.
Although the idea of compiling a budget may seem as entertaining as watching paint dry, it’s an essential component of financial success. Your budget will allow you to see where every penny is going and help you determine whether you are spending too much on non-essentials or simply not earning enough to cover even the most basic of essential items such as rent, food and transport.
You Don’t Have an Emergency Fund
Although it may seem challenging enough to try and keep track of your current expenses and budget, it is crucial to have an emergency fund in place as well. Most financial experts recommend that you set aside between 1 and 3 month’s worth of expenses in your emergency fund, and this should be enough to cover all monthly or weekly expenses in the event that you lose your job or become ill unexpectedly, your boiler dies or your car breaks down.
You are Trying to Keep up with the Joneses
One of the main reasons that so many people are up to their eyeballs in debt these days is because they are trying to outdo each other when it comes to buying consumer goods. While it may seem like ‘everyone else’ has better stuff than you own, it’s important to remember that in most cases, these toys and gadgets have been purchased on credit.
Instead of trying to impress everyone by buying fancy items or going on expensive holidays, learn to live within your means. Not only will your bank account thank you; in the long term, you will also be under far less stress because you will not have to worry about how you are going to pay for everything.
You’re Trying to Repay Debt too Quickly
When you’re in debt, it’s normal to want to try and repay every penny as quickly as possible. However, you need to keep in mind that your debt didn’t appear overnight, so there is virtually no way for it to disappear quickly. Instead, you will need to rely on your budget to help you see how much extra you can apply towards debt repayment each week or month without going short anywhere else.
Keeping the above mentioned points in mind will help get you on the road to managing your finances as best as possible. If you are feeling overwhelmed at any time when it comes to trying to keep up with debt repayments and other monetary obligations, you may need to speak with a financial advisor.