We have listed some of the most common financial mistakes that usually lead people to major financial misfortune. Steering away from these mistakes could be the key to financial stability.
1. Living without insurance
A lot of people are afraid to get insurance because they thought it would just be an additional monthly expense. What people don’t know is that insurance is there to protect you from financial losses for when you get sick or when you reach your retirement. Most insurance companies today not only offer insurance but linked to an investment as well.
2. Living paycheck to paycheck
Many households are living paycheck to paycheck, one unexpected event like the loss of employment could lead to a financial disaster. Living in this situation is like a ticking bomb waiting to happen, that would lead to a disastrous financial event and would drain your savings.
Most financial experts will advise you to set aside 3 months worth of expenses in which you can easily access. A three-month backup could be the difference between keeping or losing your house.
3. Credit Card Purchase for everyday expenses
If you can do it, steer away from using a credit card on everyday purchases. It’s becoming a habit for people tend to spend more money when paying with a credit card and making it easier to bypass a budget.
Create a budget and follow it regularly and budget your income with needs, wants, savings and debt repayment.
4. Excessive Spending
A small amount of spending on coffee or that of streaming subscription, when you add it all in one year is worth a thousand dollars. If you’re facing financial difficulty, avoiding this mistake matters and keeping in mind that every penny counts especially when you are facing bankruptcy or low in cash.
5. Not Investing
It is now easy to set up an investment portfolio in the stock market with just a small amount you can open an account.
Regular investments in an investment portfolio or a retirement account can lead to huge compounding benefits. The earlier you start, the easier it is to accumulate a large amount and fulfill your financial goals. You can take benefit from the power of compounding with long-term investments.
6. Borrow Money from Friends and Family
If you can avoid it, refrain from borrowing money from your friends or family. You may just put a strain on your relationship with them.
They may also need the money back suddenly or you may feel guilty whenever you see them. You should also never loan money to family or friends to save your relationship.
7. Buying A new Car
If you can’t afford in cash means you can’t afford it at all. Car is a depreciating asset over time, which losses the value as time goes by, and when you decide to sell the price is lower than what you paid for it.
If you want a car, consider buying one that uses less gas and costs less to insure and maintain.
8. Neglecting to Set Up a Financial Plan
Figure out what matters and sort out plans for short or long term goals. Financial planning will help you decide when you should start investing your money, how much to save for retirement and other financial goals.
Create a realistic budget and monitor your progress.
9. No Budget Plan
Creating a budget allows you to determine in advance whether you will have enough money to do the things you need to do or would like to do. Take the time to set up a budget, and continue to do it every month, monitoring your progress as you go. You can make better financial decisions if you are budgeting and you know exactly where your money is going each month.
10. Quitting a Job without a Plan
If you are having a difficult time with your current employment, you should start looking for a new job right away. This will enable you to find a new job and prevent any gaps in your employment experience.
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