Finance

5 Common Financial Mistakes People Should Avoid

Financial mistakes made in your youth can haunt you in the future. You see, it has been said that great fortunes are usually lost in poor spending habits. Planning a monthly budget is a wise way to keep track of your financial health and well-being. Some of the common mistakes that people make are not saving enough for a rainy day or not planning for an emergency fund – both necessary items when it comes to providing yourself with ample financial security and taking care of the necessities like food, clothes, and shelter!

Let’s look at some of the common mistakes people make and be wiser men by learning from the mistakes of others.

  1. Spending more than you can afford

Excessive spending and giving it the name of “living the life”  often gets you out of money and endangers your financial health. Money management has become a skill of the past. Spending as minimum as Rs. 500 per week accounts for Rs. 26,000 yearly, which if invested in SIP for the same weekly expenses, can give you an extra Rs. 3000 in your bank! avoiding this mistake really matters—after all, if you’re only a few thousand away from foreclosure or bankruptcy, every penny will count more than ever.

  1. Using credit cards, debts, or EMI as the payment method

Using credit cards to buy groceries, gasoline, or other essentials has become somewhat of a norm in today’s society. It’s okay and useful only if you pay the bills at the end of the month and do not carry it further. If you don’t, or you simply make the minimum payment, the remaining balance will begin to accrue interest and grow exponentially. It also shows you’re spending money you don’t own. Double-digit interest takes up your chance of saving money and informal & formal debts affect your personal relationships and make you dependent. So be cautious of your spending habits.

  1. Avoiding insurances 

Health policy and life insurance have seen substantial growth after the world got hit by covid. People have become more conscious about themselves and their loved ones. This is the most crucial thing, individuals shouldn’t compromise with and buy it at the very instant they start earning, you could not only save much more money but also avoid being in debt. it safeguards the financial future of your family in case of accidental death or dismemberment.

  1. Not investing in future

As the saying goes “the odds will always favour the man with a plan”.

Your financial future depends on what is going on right now. Investing in the future must be our topmost priority. People spend countless hours watching TV or scrolling through their social media feeds, but setting aside two hours a week for their finances is out of the question. You need to know where you are going & how much is to be invested and spent. 

  1. Living paycheck to paycheck.

Paycheck to paycheck is an expression describing an individual meeting his/her need and survival with little hope of saving and at greater risk if suddenly become unemployed. It happens when salaries are equal to expenses and there isn’t much scope for saving left. So, if a person comes to that he must think of the ways to either cut down expenses or work on a side- hustles for extra bucks that could be reinvested and grow with time.

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Reference links: How to be a Smart Investor, Understanding personal finance

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