It is all too easy to fall into bad habits when it comes to money. It is easy for example to use credit on a card even if it is for something that you can’t really afford.
Everyone should try to live within their means because there will come a time when it can be difficult to clear debt.
Financial management is not an academic student and most people have to learn as they go along.
If they get into trouble the first thing to do is to recognize that you are in trouble because it ought to spur you into action.
I’ve personally dealt with some bad financial habits over the years and in this article I want to share
4 Mistakes To Avoid With Your Finances
Here are some common mistakes that need rectifying if you are to have any chance of avoiding financial problems:
#1 Your Memory
You shouldn’t forget to pay your bills, especially ones where there are penalties if you are late. If you are too casual when it comes money and you forget your liabilities you can cause yourself unnecessary problems.
You can set up automatic payments as long as you know you will always have enough in your account to cover them. That requires a more disciplined approach with regard to your finances.
If you open your credit card statement and your eyes automatically go to the amount that the company needs as the minimum payment you are in trouble. That minimum payment goes largely towards paying the interest that is being applied, inevitably high.
You will hardly be reducing what is the far more important figure on the statement, the total amount outstanding. You should recognize that you will be harming your credit score if your debt in relation to your available credit is too high.
You need to pay off expensive debt. It can be done with a personal loan which is much cheaper. What you must not do is to build up a balance again.
#2 Not Facing Facts
You must give due importance to your finances whether it is buying decisions or putting money aside for an emergency fund or your retirement provisions.
It appears that many Americans admit they have made insufficient provisions for the future yet they don’t appear to be trying to do much about it.
Time is the enemy when it comes to retirement; the shorter period you save, the less your chances of building a good fund.
Most people enjoy ‘Sales’ and justify their spending because of the value of an offer. Unfortunately if you buy something you can ill-afford and end up with extra credit card debt the real cost of the purchase will increase by the amount of interest you will pay until it is paid for in full.
Having to face emergencies by using your credit card. This adds up to problems as described above. High interest is a waste and you should start to make provision for emergencies by saving a fund.
This is a common problem I fell into a lot of times. We would buy something just because we could get a good deal on it now but the problem always came down the road when our credit cards were overloaded. I hate to think how much money we could have save by not buying the deals and saving our money.
If you want to hear more about how I paid off my debt check out this podcast episode here.
#4 Budget for Savings
If you associate yourself with any of these problems then you need to invest; invest some of your time in making plans for your future. Those plans must include a budget that details all your income and expenditure with no omissions and look at what is there before you.
The minimum it should show is break-even but if you have significant debt where you are simply paying a figure that does little or nothing to reduce that debt then there is plenty of work to do.
The consolidation loan mentioned above can clear card debt and it should result in savings even if the installment payment is higher than the minimum your card company currently want from you each month.
It is just the first step in a process to get your affairs in order. You can look at direct savings as well. Even if you were happy to sign up to a utility supplier, a telephone network and your insurance premiums looked good you should check whether you are getting value.
Comparative websites provide a guide to the best prices in the market place and it is worth checking to see whether you can make savings.
If you can gradually get in control of your expenditure you should be able to plan for the future whether an emergency fund or retirement. If you can avoid some of the common mistakes mentioned then in your coming years you should be able to be well-prepared for anything.
Personally I’m just getting back on my feet with my finances again and my hope is that you will learn from the mistakes I’ve shared here and make a better financial future for yourself.
What kind of mistakes have you made with your finances? Share your thoughts and comments below.