Managing finances will be a key part of your life. You don’t have to be a financial manager or a stock dealer to have an interest in money.
After all, managing your personal finances will have a big effect on your overall life. If you are good at managing your cash, then you and your family will reap the benefits.
However, if you make one too many mistakes, you could end up in a sticky situation. So no matter who you are, it is crucial that you have a basic idea of how finance and the economy work.
Are you pretty new to all of this?
Or do you want to brush up your knowledge of the basics? Either way, this guide to the ten most common mistakes in finance can help you improve your money management.
#1 Not Having A Budget
This is super important: always budget.
Make sure you have a budget for every part of your life. Decide how much you can afford on groceries, bills, and other necessities.
And then you will be able to see how much you have leftover to spend on fun stuff for your family and to save.
Not budgeting means you won’t have much of an idea of how your money is doing. And you won’t be able to save as much as you might like.
So first things first. Get on top of your money and make a budget!
#2 You Don’t Know Your Bank Manager
It is important to have a good relationship with your bank manager.
Even if it is just making sure you say hello next time you go to your bank to take out some money.
If your bank manager knows you to talk to, he will have an idea of the type of person you might be.
And that can work in your favor if you ever need to apply for a loan or other type of credit.
#3 You Don’t Take Enough Risks
If you leave your money in a bank, it won’t grow as much as you might like it.
Sure, it will have interest added on every month. But, depending on the interest rates, this can be quite low.
You will have much more success if you take a bit of a risk with your money and place it in stocks and shares.
There are other investment opportunities as well, such as funds. Not too sure which is best for you to invest in? You can find out about stocks online and get info at Money Morning.
#4 Making Unnecessary Regular Payments
Do you really need all those things that you pay monthly for?
If you stop some of the monthly direct debits from your bank accounts, you could certainly save a significant amount of money.
So take a look at all of your subscriptions. Things like cable TV, mobile phone plans, and gym subscriptions.
Getting rid of these can free up a lot of money for you.
#5 Buying A Big House
So many people try to get as much house for their money as possible.
But is it really worth it? If you are a family of four, there isn’t much point in buying a five-bedroom home.
Four bedrooms should do, and you will still have one spare. So rather than looking for a large house at the top-end of your budget, look for something just the right size. It will work out a lot cheaper.
And the mortgage repayments won’t last quite so long!
#6 Living From One Paycheck To The Next
Instead of living paycheck to paycheck, you need to try and save some cash.
If you are running out of money at the end of each month, you are doing something wrong with your finances!
Take another look at your budget. Are you overspending in one particular area? Or maybe there are some luxury items you should maybe stop buying for a few months?
Do whatever it takes to be able to save some money at the end of the month, no matter how small an amount it is.
#7 You Are Being Too Frivolous With Your Money
Grabbing a coffee on your work is no big deal, right?
Have you added up how much you are spending each year on your daily coffee?
It might seem cheap on the day, but when you look at the yearly cost, you could be in for a big shock!
All of these little frivolous purchases will be adding up to create a big hole in your pocket. Cut down on all of these and you will find it much easier to save money at the end of the month.
#8 Relying On Credit
Can’t afford that new car that you really want? Well, don’t buy it.
Don’t take out a loan and rely on credit to purchase it. This will just cause major problems in the long run, especially if you use credit to make a variety of purchases.
You will have to repay more money than you were lent, which can make it very easy to get into bigger debt.
The best way to be able to afford something is to save up for it. Even if it takes a year or so, you will get your car in the end!
#9 Being Frivolous With Home Equity
Just because you can use your home equity to release more cash doesn’t mean you should necessarily do so.
Your house is your home, and using its equity can put it at risk. Do you really want to take a chance that could end up in your family home being taken away from you?
Instead of making payments in perpetuity, you need to be smart and build your equity.
The main points that you need to take away from this useful blog post?
Organization and careful planning! The key to good money management is to think everything through carefully.
Don’t go second guessing things you should do with your well-earned cash!
So what are you doing to avoid these mistakes? Share your thoughts and comments below.