Even though money can be quite difficult to manage especially since most of us don’t receive an education in it, it can be pretty easy to avoid the top 5 financial mistakes once you know what they are. So what are the biggest mistakes when it comes to money management?
Not Knowing How Much You Can Spend
One of the most common reasons that people get into financial trouble is because they don’t know exactly how much they earn, what their bills and debt payments look like and how much that leaves them to spend each month. Using basic math, if you spend more than you earn you’ll end up deeply in debt. Most of us know this but many of us fail to apply it to our own lives by spending freely on credit cards or by not budgeting properly and not knowing exactly how much you can spend to move forward.
Not Having any Savings
Now I’ve never been one to fully advocate saving copious amounts of money, you should be investing your money not just letting it sit in your bank account but I do believe that having some savings is important to have just in case. You never know when an emergency or an unexpected expense could happen and wipe you out completely so it’s really better to be safe than sorry. Ideally you should try to have 6 months worth of expenses saved up but even just a few grand would really help out in a time of need.
Not Bothering to Invest
Investing is crucial for your financial well-being and yet so many people don’t take advantage of the opportunities because they are afraid of risking their money and losing everything. The trick to not losing your money is to have an extensive knowledge of what you’re investing in. Take some time to properly research all your options before jumping into anything and don’t blindly take financial advice from others; once you’ve educated yourself you’ll feel confident enough about your money to invest for high ROIs. Don’t feel confident yet? Spend your time gathering more and more information until you do. Yes investing can be a lot of work but it can pay off big time at the end so don’t neglect it just because it’s “risky.”
Not Planning for the Future
So many people end up living pay check to pay check, just trying to survive and get through now that they never have time to think and plan for their financial future. Unfortunately the sad truth is that with Social Security running out, unless you have actively planned and worked towards your retirement, you might not be able to retire at all. You think its hard dealing with everything now? Wait until your body starts to give out on you and you’re up to your ears in medical bills. Plan for your retirement by investing properly and starting early; make a realistic goal of what you need and work towards it. Don’t get discouraged if you have to go back and re-adjust your plan a few times before you get something that will make a difference and suits your lifestyle enough that you can implement in for the long run. The earlier you start, the better chance you have of achieving it.
Not Being Consistent
Nothing can be achieved unless you continue to work at it on a regular basis. So many individuals make great plans and stick with them for a week or a month and then get back to their old habits and wonder why their finances aren’t improving. As with anything, your financial well-being takes practice; it won’t happen overnight and needs to be constantly worked at in order to see the results. Keep track of your progress every 6 months to really see the improvements you’re making and if you fall off the path you made, don’t worry just get back up and try again. Success is made through consistent efforts to achieve your goals.
Staz Johnson has been passionately blogging about personal finance, finance tips, frugality, investing and more. To find more financial blunder, visit top 10 financial mistakes or check out her Facebook page here.