Almost anyone, if not everyone, is bound to make financial mistakes at some point in their lives. In the world of money, there can be so many wrong turns that you can take over the course of figuring everything out before you go completely broke. Here are some of the most common money mistakes we all make, categorized into four general money no-no’s:
In a rat race, you are usually exhausting all of your energy in living a highly competitive lifestyle. In money terms, it is a life that is lived while continually competing with your financial problems that seem never-ending. Here are a few things that can contribute to this kind of lifestyle:
- Blowing all of your paycheck. Somehow, many people feel a great urge to spend everything they own down to the last penny. They seem to be itching to get rid of all of the money they happen to see in their wallets or bank accounts.
- Not budgeting. Have you ever had an instance where you ended up saying, “where did all my money go?”? That is a clear symptom of not having a budget in place.
- Having little or no savings. Living paycheck to paycheck takes some level of commitment to neglect your savings account. At the end of the day, you basically blew up all of your earnings to have a savings account containing nil.
2. Living on debt
The statistics on personal debt in America is nothing short of extraordinary. It says that almost 200 million Americans are on credit and that the average credit holder owns four cards–that is nearly a billion credit cards in one country alone! Here are two examples to confirm that you are living on debt:
- Relying too much on your credit card. Nowadays, it is common for people not to carry cash anymore, and we totally get it. It’s convenient, easy, and you don’t have to carry a bulky purse when you go out to shop. But it seems the helpful little card is actually a double-edged sword.
- Borrowing from friends and family. When you’re in a tight spot and you don’t have anything to offer the bank to take out a loan, you might be tempted to call up your mom just to get by. Be careful as this might end up becoming a habit.
3. Unnecessary spending
Everyone is guilty of this–from the cute little indulgences in our daily lives, to the huge luxurious expenses that some people splurge on every now and then. Here are some of the most common (and most likely relatable) examples of unnecessary spending:
- Your daily coffee habit. You don’t really need that sweet milky, frothy thing that comes in a takeaway cup every day. If you think you are caffeine-dependent, that coffee pot at home can give you the same thing you need for 90% less cash, and 90% less sugar.
- Getting takeout for lunch every day. Food businesses don’t cook for you for free. If you buy each ingredient there is in that burrito from the supermarket and make the darn wrap yourself, you’ll likely save a whole lot of money while possibly cutting down on the calories.
- Retail therapy sessions. There is something about buying something that creates this euphoric feeling for people. It can turn a frown upside down. The only problem is, you’ll be frowning again soon after checking your credit statements.
- Unused subscriptions. If you have a gym membership, make sure you go to your gym every day and get your money’s worth of exercise. The same goes for cable, internet, phone, and paid magazine subscriptions.
- Buying too big a house. If you are living alone, is there any logical reason why you should buy that two-story, three-bedroom townhouse? You are most likely going to apply for a mortgage and pay for it for the rest of your life.
- Buying too fancy a car. Maybe not many people can afford to get a Bentley, but what people seem to buy or loan for needlessly are SUVs. These types of vehicles are expensive upfront and expensive to maintain, plus they consume a lot of gas. If you don’t regularly travel off-road or have a family of at least four, just don’t go for it.
4. Not planning ahead
In the famous words of Benjamin Franklin, “If you fail to plan, you plan to fail.”. Not planning for your financial future is probably the most obvious reason why some people suddenly just go broke despite living comfortably in the past. Here are some prime instances that can cause future financial failure:
- Not having insurance. Even something as simple as treating an infected ingrown toenail can cost a small fortune if you don’t have health insurance. Also, imagine if something severe happens to you, do you think your family can afford to continue living as comfortably as they usually do in your financial presence?
- Not investing your money. If you continue to rely on your current income to sustain your lifestyle solely, you are never going to be able to retire. If you factor in how much prices are just going to keep on inflating year by year, you’ll find that you are pretty much financially stuck unless you make your money catch up.
- Having no emergency fund. A broken leg or pneumonia isn’t the only thing you need to prepare for financially. Some inadvertent damage in the house or a car break down can set you back just as much, and having nothing to pull out of your pocket spells trouble.
- Having no retirement fund. Just as mentioned in investments, you are most likely going to toil away for the rest of your days if you don’t prepare for old age. If you envision yourself on a cruise or traveling the world in style some forty years from now, a retirement fund can help you achieve that.
If you’re guilty of any (or all) of the common money mistakes mentioned above, don’t despair because there is still hope for you. It is never too late to check out some top personal finance online courses that aim to teach you personal finance strategies that you can apply to your daily life.