It’s possible you have by now witnessed a low wager employee manage to save into buying a home or jackpot winner becoming broke in just a few weeks. Even with this, it’s safe to that discipline and commitment is crucial in attaining financial freedom, both at home and in business. Though you might spend money easily, earning it can be hard.
So, what primary money mistakes are made by most people? Here we’ll look at 9 such mistakes. Here goes!
1. Not Budgeting
One pillar of planning your finances is having a budget. As you make a budget, make sure you compare your expenditures against your capital inflows. Here what counts most is the commitment and discipline you have in following it. Despite having a budget, you will need to monitor your overall spending. Why is it important for you to monitor your spending patterns? This will help you see whether they align with your budget or not.
2. Depending On a Single Income Source
This limits the extra amount of cash you have for investments. It is recommended that you have multiple income sources in case your mainstream income fails. Also, for young people, they have lots of time and energy, thus holding a second job or starting a business might offer them added benefit. Also to help you be control of your finances, always make sure your housing costs do not hinder other key long-term financial goals and objectives.
3. Not Planning How To Repay Student Loans
Why do you need repayment for your student loan loans? Consider consulting experts and student loan financial advisers to learn of the different rates of interest and loan terms of service. Also, do consider having a strategy in place on how you intend to repay the existing debts. Where possible, always avoid taking on loans offered that attract hire interests at all times. For example, you could choose to apply for grants, scholarships, or even get a day job that way you can easily pay for the fees charged.
4. Spending All The Money
By spending all your cash, you do risk putting yourself in a vulnerable position. In addition, it will make saving quite hard considering all the cash is gone. Look at it this way, nearly all financial goals can be attained by making savings. And what this implies is that it is essential for you to set targets for your finances. Again, this can be a great motivating factor for you to save. Most financial advisors will suggest using the 50/15/5 rule when saving and spending money; 50% goes to overall expenses, 15% for retirement savings and 5% going to normal savings. Sounds simple, right?
5. Attempting To Have The Latest Fashions And Trends
This may not be the best idea as far as saving money goes. This kind of spending is a money killer, and can potentially lead to large debts. As you strive to upgrade your wardrobe to the current fashion trends, usually you will not be aligned with your lifestyles. What this then means is that you will be spending more money than what you are actually making. And besides, owning the latest i-phone may not necessarily make you any happier as when you buy your own home.
6. Not Pre-Planning For Major Life Events
Have you set aside some money for those major events in life? Being financially stable can offer you a solid footing as you enter into a solid commitment such as marriage. What is more, having a child is even a bigger responsibility. Therefore, it’s not recommended to take on with no preparation in place. For instance, organizing a wedding without having sufficient funds might not be a good idea. With this in mind, it is very important that you set aside some money to cover such life-changing events.
7. Not Saving For Retirement
Do you have a retirement plan in place for later? Why do you need to save for retirement? By starting to save now for retirement, you will be in a better position to cope then considering you might not have a steady income source. Some employees solely depend on the retirement plan they get from their company. But, without closely monitoring, this amount may not necessarily be sufficient. Then again most people buy the idea that they do not have sufficient funds. But, this is not always the case. For you to make a major difference in your life, do consider following a step by step plan for saving.
8. Replacing Items When They Aren’t Broken
Another money mistake many people are given to make is opting to change their furniture or electronics each year even when they are not broken. Particularly if you have a modest amount that may be put in better use elsewhere. Opting for the latest electronic devices such as a TV could slow down your wealth growth process. For your financial well-being, making such purchases can hinder your pursuit for other more important financial goals. Ad this can include goals like saving for your retirement or even a house.
9. Not Identifying a Need From a Want
To help you avoid impulse buying, it is essential that you are able to differentiate between wants and needs. For many people, this could mean that you may well not know when to make that purchase or avoid it altogether. How you tell “a need” from “a want” can help you in planning your finances. It is, therefore, very necessary that you are able to differentiate wants (these are exaggerated needs) and needs (things you can’t live without). Knowing this might help you choose as you are making any purchases.
Despite this, attaining financial freedom is very possible can help you lead a life free of stress; with no burdens and financial pressures. All you may need to do is have a plan and seek to follow through with each of your plans. By doing this, you will notice that reaching your goals is a lot easier!