15 Common Money Mistakes To Avoid

There are times we do things that we eventually regret. Regrets are not always bad, as it reminds us to be cautious the second time around. However, when it comes to finances, mistakes that lead to regrets can become somehow too damaging to handle. That’s what you should be careful in handling your funds. If you are not wise enough, you might spoil the good future ahead of you and your family.

Even an enormous fortune can get lost by spending naively. It might not appear to be a big deal to buy that plane ticket for your travel, buy that pay-per-view movie, or have a dinner out, but if you come to think of it, every little purchase adds up.

In some cases, some people are trying to look rich, that they often forget that getting there comes from little steps of saving a few pennies. Just $25 every week spent on dining outside costs you $1,300 a year, which could already go a long way if you invested in stocks.

15 Money Mistakes You Should Avoid

It is important to take a good note that the choices you make, no matter how small, can drastically affect your finances and life in the future. From having no financial plan to spending too much and not living within means, here are the 15 money mistakes you should avoid at all costs:

Not Having a Financial Plan

Tailoring a financial plan is crucial as it serves as a step-by-step guide to reach life goals. Having a financial plan allows you to manage your income, investments, and expenses, which will allow you to handle money better to achieve your dreams.

There are two existing grounds for people when it comes to finances: those who swear by their plans and one for those who do not have any. Financial planners tend to have mapped-out steps for the following days, weeks, months, and even years, with specific investing and saving goals for themselves. Those who do not have plans assume that things will eventually work out for them just by working all day long with no solid plans.

Unfortunately, without having a solid financial plan, reaching your financial goals will be way more difficult because you will have no idea which goal to accomplish next. To create a financial plan, you need to devise a budget that would work for you and cut down your goals into small,

manageable pieces so you can reach them one by one. And of course, take into accound that your goals should be realistic and could come accordingly to your budget.

Not Counting Small Purchases

Some people say you could use up all the money you earn and splurge as long as you could increase your income to spend more. On the other hand, some say you should save as much as you can, to the extent of your financial capability. According to Common Wisdom, it is your responsibility to count every penny you spend, even on small purchases like morning coffee.

If you do this, you are building up a room for growth to pleasure and freedom, realizing the middle ground between free-spending and extreme saving.

Eliminate bad spending habits and build up millionaire habits. Stop paying subscriptions that you don’t really need and give up on entertainment that uses up more of your time to be productive.

Not Having Money Goals

You cannot create a financial plan without devising a money goal first. You need to keep in mind three important things while making a money goal— details about the goal, amount of money, and deadline. Describe in your plan the details of why and how you can achieve the goal you want and the possible challenges that might come along the way.

This could also be applied to other aspects of your life aside from finances. For instance, if you desire to lose weight, include in your plan “how much.”

If you want to have more friends, then include “how many.” In setting up a money goal, you should always put up a specific target.

Not Watching Your Credit Score

People tend to lose focus on the long-term consequences of a choice. For example, some think it is okay to pay credit balances late as long as they will surely pay. However, not paying on time will hurt your credit score. Your credit score serves as your credibility, and it can be used to make a loan for your business, car, or house.

If you hurt your credit score, you would not immediately feel its backslash on you. But once you do, it will be frustrating.

Impulse Shopping

Impulse shopping is a huge problem, especially when it comes to groceries. Buying a lot of foods can be tempting. That is why you need to make a list of what you need to buy to avoid buying things out of impulse.

Aside from impulse grocery shopping, buying anything on impulse is generally not ideal. Do not buy something just because you feel like buying. Instead, you should think thoroughly if you really need it, or you just want to feel good to have it. Spend only on things that you badly need and if you have money to spare after saving.

Impluse shopping

Thinking You Can Afford

Possessing enough money to buy the things you like doesn’t really mean that you can afford it. Here is the rule: If you cannot buy the items you want three times their price, you cannot afford them.

The only time you can say you can afford something is when you have more than enough money to spare after buying it.

You Don’t Diversify

A market crash can happen anytime, and if you don’t diversify, you can lose everything you have in a blink of an eye. Diversifying is one of the ways to beat a market crash. But besides diversifying your portfolio, you should also diversify your sources of income.

Being in the digital age made it easier to earn money through a part-time job. There is a countless freelance job on the internet, and you just have to find one that suits your skills best. Do not lay down all of your hopes on one source of income, but instead diversify the time you have to look for jobs that can bring you in more money.

Not Having Emergency Fund

Opening an account for emergency fund is very important as it will help you in case there are unexpected expenses ahead. Having a fund for emergencies will give you peace of mind of not living one paycheck away.

Emergency Fund

You Spend More Than Your Income

If you tend to spend more money than you make, that is a sign that you’re not ready to get rich. If spending all of your income is already a disaster, how much more if you spend more than you are earning? It will lead you to debt.

Do not pump up your credit card unless you badly need it.

Lending Money

Being a nice person comes with serious consequences too. Lending money to a family who badly needs it is a good act of service, but you need to be careful. Control yourself on giving too much. Pay yourself first, so when you already save more than enough, you could help more.

Wasting Free Time

Having free time is already a luxury, so you need to use it for valuable things. If you keep wasting your time lying on your bed while watching a Netflix series, you are wasting your time. Rather than doing things that will not bring you value, focus on doing things that will make you feel productive, like honing your skills.

One day, you will realize how important time is, and your actions now will tell if you are going to thank yourself in the future for using your time smartly or if you will have regrets.

Not Negotiating

If a client wants to pay you $15 per hour, you can try negotiating it to $25. There’s a chance that he will not agree to $25 but will settle at $20. Always try to negotiate to get the highest possible amount they could give. Don’t immediately settle for things that are less than what you deserve if you know you deserve more.

Not Negotiating

Not Optimizing Your Taxes

There are numerous ways to lessen and optimize your taxes, and you could do research or get help from an accountant to know more about it. Optimizing your taxes would help you save more.

Not Saving

The Coronavirus 2019 gave us a lesson of saving. People lose their job. And quite a lot of people have no food to serve on their table is because they have no savings that can be used in case of emergency. This is the perfect example of the consequences of not having savings. Once you badly need money, where can you go and get it if people around you need it too?

Not saving money is a big mistake and dangerous. If you do not use the money you have now wisely, you will be risking a lot of things in the future. Saving is one of the foundations of success, and until you save consistently, your finances will always be unstable.

Not Switching Expensive Services

Quite a lot of people are loyal to their service providers, so even when prices went up while quality has gone down, they don’t look for more affordable services because they have been with them for years.

Switching service providers could help you save more money than you expected.

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