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As you move through life, there are all sorts of financial decisions to be made along the way. And while some of these will prove to be wise and sensible, there are others which are mistakes. Of course, everyone would like to avoid making financial errors if they could, but this is something which is simply not possible. However, you can minimize your risk of making big mistakes by knowing some of the most common slip-ups (or banana skins) out there. Steering clear of these could end up making all the difference in the long-run. So, let’s look closer at some of these right here and now.
It is those regular costs which could end up harming you in a big way. A cup of coffee per day may not seem like a lot on its own, but over the course of a year, it will add up to hundreds down the drain. So, you should try to identify these expenditures so that you can take steps to reduce them. Simply making your coffee at home on a more regular basis could end up having a big boost to your financial situation.
Monthly subscriptions fly out of your bank account each and every month without you fully realising what has happened. And one of the major issues is that they never end. Worse still is that you could be paying for them without actually using the product or service. One of the main culprits is a gym membership, but the same could be said of a cable bill, music streaming service etc. So, now is a good opportunity to reassess your monthly payments to see if there are any which you could trim back on.
Buying a New Car
When you want to get a new set of wheels, this doesn’t necessarily mean that they should be ‘new’. Buying a car first-hand will end up being an asset which depreciates in a big way. And if you have had to borrow money to buy the car in the first place, you will have to pay interest on this depreciating asset. Ultimately, unless you are certain that you are in a staple enough financial position to afford it, you are much better off looking to the used car market. And while you are at it, you should look closer at its fuel efficiency levels to make sure that you won’t have to pay a fortune in petrol bills.
If you’re looking for advice on How to Sell an Upside Down Car, check out this post.
Spending Too Much on a House
When you come to buy a house, don’t automatically assume that bigger is going to be better – at least not financially. As well as working out whether you can comfortably afford the house price, you also need to consider the tax situation, maintenance, utilities etc. Otherwise, you will be hitting your monthly budget in a big way – and you could end up having to go through an expensive moving situation.
Living from Paycheck to Paycheck
Of course, low wages are a problem in this day and age, causing people to live from paycheck to paycheck. But there are plenty more who are in this situation because they don’t take simple financial actions to avoid it like making a household budget, channeling cash into a savings account, and reassessing their spending habits. If you were to find yourself suddenly plunged into a financial disaster like losing your job, you would have nothing to fall back on. Most sensible monetary wisdom comes back to telling you that you should have at least three months’ worth of living expenses to fall back on. This way, you have some time to get yourself back on your feet.
Many people don’t invest simply because they don’t know enough about it. But if you don’t get your money working for you in some way, you will have to keep on working and you won’t have a form of passive income. The earlier that you start making monthly contributions to a designated retirement account, the more comfortable that you are going to be in the long-run. To start off with, you need to get a better understanding of investments in the first place. There is plenty of information available online or you could even hire a financial professional to help you out. Set yourself some goals and also evaluate the level of risk that you are comfortable taking.
Not Having a Plan
Unfortunately, too many people defer their financial planning – thinking that it is something that is not going to matter until long into the future. But life has a funny way of rushing by in an instant, and you could end up wondering where all the time that you thought you had went. Giving yourself some regular targets to hit is one of the best ways of making sure that you always stay on course. And you should be sitting down to assess how you are doing to see if you need to make any adjustments or improvements on a regular basis.
All sorts of shops and businesses set themselves up to encourage impulse buying. But this is not a financial habit which is going to stand you in good stead. First of all, you are likely to end up buying things which you don’t particularly want or need. Not only this, you could end up getting ripped off for them. So, if you do see something in a store that you think you would like to buy, stop to give yourself some thinking time. If you do decide that you would still like to buy it, look for places where you are able to get the item cheaper. Ultimately, you need to bring a sense of rationality back to your decisions – something which impulse buying naturally discourages.
Living on Borrowed Money
In the modern world, it has become somewhat normal to use credit cards to buy everyday essentials. But the more that you rack up on your plastic, the more interest that you are going to end up paying back again. And the other negative factor involved in relying too heavily on credit is that it is likely that you will spend more than you earn. While credit cards can be useful if used properly, you should keep track of how much you are putting on them on a monthly basis so that you can pay it off in full at the end of the month. If you are trying to clear your credit card debt, the very least that you can do is make the minimum repayments, and concentrate on paying the one with the highest rate of interest off first.
Refinancing Your Home Too Readily
While it may be tempting to refinance your home to get the ‘ready money’ which lies within, every time you do this, you are giving away the ownership to someone else. Instead, you should be looking to build up equity rather than making payments from now onwards. As well as this, you will end up paying more for your home than it is worth – which is not a particularly appealing thought for anyone!
Avoiding these common financial pitfalls will go a long way towards stabalising your future. Of course, just because you have read through these now, it doesn’t necessarily mean that you will remember them long into the future. You need to make a habit of continually reassessing your financial goals to make sure that you are always on track.
I’ve done all the things! Girl, I’ve washed my face. I’ve trashed everything that doesn’t spark joy. I’ve walked the baby steps. I’ve cried. I’ve prayed, but my perfectionism has really held me back.
Perfection Hangover can be crippling. Stop comparing yourself to others and start living your best life! That’s why PH exists! I want to encourage you to take control of your money, your blog, and your business.