We are all guilty of making common financial mistakes, and sadly, most of the time these mistakes can be easily avoided! You can’t avoid them unless you know what they are, so here are some of the common and most repeated financial mistakes that your average person makes. Whether you are just starting out or have been on your own for a long while, these tips can help you realize where your money is going, and how to nip money problems in the bud! Keep reading to learn the most common financial mistakes.
1. Not Creating a Budget
Probably the biggest of all common financial mistakes is not creating a budget. It’s easy to just swipe a card without considering where the money is all going. When creating a budget, bills and necessary expenses should be first, then leisure spending money. Prioritizing is important!
Yes, one of the financial mistakes people make is spending their money. Of course we need to spend money to live. But there is a difference between wants and needs. When you start spending your money on wants, then when you have to shell out for the needs you may be in a bind! Distinguish between the two; also be on the lookout for impulse buys.
3. Buying More than You Need
It’s so easy for newly married couples or college age young people to feel like they have to start out their life with all the nice things their parents currently own. What most people don’t realize is that their parents probably started out with way less than what they have now. When I got married, most of what we had was given to us. We had to build up to what we own now! Don’t start out and rush into debt to buy a 4-bedroom house with furniture for every room. Buy what you can afford, and what offers the amenities you currently need.
4. Going into Unnecessary Debt
As difficult as it is to save up your pennies for something you want, it’s better to wait and pay outright cash instead of taking out loans. Sometimes debt can’t be avoided, but try to distinguish between necessary debt and unnecessary debt. Do you really need three cars right now? Probably not!
5. Your Attitude about Money
Believe it or not, the attitude you have towards money can be a financial mistake if you don’t have the RIGHT attitude! Money is meant to aid your life, not control it. But for many people, money seems to rule their lives. It’s ok to strive for more, or better than what you have, but don’t let it consume you!
6. Not Having an Emergency Fund
How many people don’t have an emergency fund, or spend it on frivolous things? When you don’t have an emergency fund, and you run into an emergency, you are forced to do one of two things. Either go into debt, or deplete your bank account and possibly over budget or overdraft. No good either way!
7. Disregarding the Importance of Savings
When you live paycheck to paycheck, even finding that extra $5 or $10 a month can be next to impossible! But when you can start to scrape together the money to put back a little into savings, you will feel better when you start to watch it grow. Don’t forget the importance of a retirement fund either.
8. Not Thinking Big Purchases through
Have you ever just decided you wanted something, and went out and bought it? With bigger purchases, it’s important to take some time and think it through. Decide whether you can afford it, and whether you really need it right now. Shop around for the best price before you jump in headfirst!
If you are guilty of making any of these financial mistakes, don’t worry! You can start to get yourself out of debt, little by little. Make small tweaks to your budget, and make a conscious effort to restrain yourself in the money department. You will soon see changes! Have you ever made any of these common financial mistakes?