Avoid The Top 10 Personal Finance Mistakes
Many of you do not know the right way to invest money. As a result, you land up in hardships in the long run. It is a dream of all of us to see a considerable amount of bank balance by retiring. It is often said that having a great fortune means you are sure to lose some wealth by spending it lavishly. Unfortunately, not all have the habit of saving and investing money.
For some reason or the other, your financial health is negatively affected.
Why do people fail to save money?
1. Failing to pay for oneself
If you are a working individual and have specific responsibilities to carry out in terms of money, most of you postpone them. Let us take an example to understand this point. Suppose you have to pay some bills for yourself like electricity, rent, tax, etc. You think of paying them later and prefer investing this money in some fancy item. But what you fail to look at is that by the time you feel like carrying out your responsibilities, you are already in shortage of money.
2. Sudden reduction in income
Another common reason people fail to save adequate money is a sudden drop in their income level. If you face a sudden reduction in income, you have to cut down your unnecessary expenses and follow a strict schedule to meet up with your responsibilities at ease.
3. Lack of satisfaction
If you are a psychology student, you will know that if you are not satisfied properly, you will feel like hunting and bumping up into things that you think can make you happy. Now, think calmly and try to answer this question – Can you get satisfied in that way? Of course, the obvious answer is no. This way, you will only be successful in buying unnecessary things and emptying your funds.
4. Paying debts of higher interest rates
It is not harmful to have a debt as long as you are aware of the time you need to repay. Also, you need to make sure that you can meet the rate of interest that had been initially fixed. However, many people fail to repay the debts that have a higher rate of interest. As a result, a lot of money is gone into paying debts.
5. Health problems
If you are a person with bad health or possess some chronic health issue, a certain amount of money will be incurred. This is an unavoidable situation as you cannot stay without attending to your health conditions.
6. No habit of saving
Not all are born with the nature of saving money. Although none is born as a spendthrift, your habits make you one. But when it comes to money, you have to be persistent in both earning and saving. The practices that concern money are developed in an individual right from his adolescence. It is okay to overspend until you are financially in a stable position.
7. Parental influence
The parents should teach money management to the children right from when they get to understand the importance of money. Parents shouldn’t showcase a spendthrift nature as the children will catch it once they grow up.
8. Getting confused between wants and needs
To live a simple life, you don’t need that much money. Having a shelter, getting adequate meals at proper times of the day, and sleeping with a peaceful mind is what you need to survive. But most people are confused between their necessity and luxury, where all the money goes into the drains. There are a lot of reasons for which you fail to save your money, but one needs to improve the habits of saving and investment. For starters, you may check out mas regulated forex brokers in Singapore to start your journey of investing in stock markets.
What to avoid?
Now that you know the distinct reasons behind not saving adequate money for a secured future, it is time to learn the things you need to avoid. They are listed down below:
1. Spending frivolously
If you enter a five-star restaurant, you will not understand where all your money went. Yes, food over there is that expensive. If you spend near about Rs.2000 every weekend, you are paying Rs by the end of the month. 8000 only in a restaurant. Is this really needed? Again, you prefer buying new clothes even if you have sufficient clothes. Maybe the older ones have not yet replenished, and you still want to buy new only to show off. All these habits must stop the moment you want to save.
2. Getting into the loop of never-ending payments
Take a look at the items for which you have to pay every month. Ask yourself whether you need them. Some of the items that force you to pay every month can be gym, cable television, subscription in different OTT platforms, etc. Stop paying for things that you can do without.
3. Depending on borrowed money
Many of you prefer using credit cards as you do not take that much cash in your pockets. However, are you aware of the cons of using a credit card? When you are paying by using a credit card, you have to pay the rate of interest levied on the card. Hence, you are spending more. Try to get rid of these habits as sometimes, using a credit card can also make you spend more than you earn. Instead, plan as to what you want to buy and carry adequate cash with you.
4. Buying a new automobile
Who doesn’t like to own a car! All of us do. But buying a car has its own set of advantages and disadvantages. You can travel without having to depend on public transport, and you can travel comfortably and reach the destinations faster – these are the advantages of owning a car.
What about the disadvantages? When you plan to save a considerable amount of money from securing your future, it is better to avoid buying a car. As soon as you buy a car, you will have to allot some cash for its maintenance. If you keep a driver, you will have to pay him on a monthly basis. Again, if the car is taken on a loan, you will have to repay the loan. Therefore, a lot of money gets stuck behind this one vehicle.
5. Investing unnecessary money behind your house
If you plan to buy a house, do not follow this maxim – ‘the bigger, the better.’ First, see what you require, rather than how much space you need to live comfortably. Unless and until you belong to a joint family, you do not have a house of 6000 sq. ft. Therefore, the more space you buy, the larger the dent you make in your savings.
6. Consider home equity as your piggy bank
If you are in the habit of refinancing, it is high time that you stop it now. This is because, when you refinance, you are taking cash out of your house and giving its ownership to somebody else. Hence, after you refinance, somebody else can exercise power on your money. Therefore, one good policy to avoid refinancing is to open a home equity line of credit.
7. Repaying debts with savings
You have taken a debt and plan to repay it with the interest that you get in the money saved in the bank. However, it is not as easy as you think. When you withdraw money from your savings account, your total summation will get reduced. Therefore, the rate of interest that you were enjoying previously will not be the same anymore.
8. Not investing in retirement
When it comes to saving, it is always wise to start as early as possible. The earlier you start, the more significant amount you can see as bank balance by the time you reach your retirement age. Many of you do not pay attention to your savings at a younger age. However, keep aside at least 15 % – 20 % of the money you earn annually for investment purposes. Once can consider reading a pepperstone review to find out more on investment options in stocks.
9. Lack of financial plan
Your financial security is very much dependent on the way you plan things now. So instead of wasting a lot of time on social media or watching TV, sit with an older adult or a financial advisor to plan your investments.
10. Lending money without looking at the consequences
It is good to be generous but make sure you are aware of where you are lending money. When you lend money, you expect to get it within a prescribed time. Therefore, ensure to check the return policy before you lend.
Therefore, now that you are aware of the things to avoid to be financially stable, take a step back and pay attention to the mistakes you have made, which you could easily avoid. Then, rectify them, and plan for a secured future. Also, it is essential to develop financial planning and follow it thoroughly. When you have a dedicated financial plan at hand, it helps in avoiding some common personal finance mistakes.
George is the Chief Market and Broker Analyst at brokertested.com. Prior to being recruited by brokertested.com, I served SVS Securities as Chief Market Analyst for two years. Earlier, he joined Morgan Stanley in Nov 2013 as Research Analyst.
George is a well-rounded financial services professional experienced in fundamental and technical analysis, global macroeconomic research, foreign exchange and commodity markets and an independent trader.
Disclaimer: This is a press release. Readers should do their own due diligence before taking any actions related to the promoted company or any of its affiliates or services. AZCoin News is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in the press release.