If you’ve ever tried to manage money, you know it can be challenging. And, if you’re like most people, you probably haven’t always had success with your finances. Sadly there are a lot financial mistakes to avoid when it comes to our finances. The good news is there are many financial mistakes that almost everyone makes. However, these mistakes don’t need to negatively impact your wallet.
With a little bit of knowledge and self-awareness, you can begin to fix them and start becoming more financially aware again. Not having enough information about your money is the primary cause of financial difficulties for most people. Once you learn the basics about personal finance and how to manage your money, those difficulties will become less frequent for you. In this article, we’ll go over 5 financial mistakes to avoid and explain how they can be fixed:
5 Financial Mistakes to Avoid
Not Understanding Debt
If you don’t know how much you owe on any given debt, then you’re setting yourself up for financial stress. Make it a priority to figure out how much you owe to all of your creditors. From there, you can begin to create a payment plan that allows you to meet your obligations while still having money left over to invest. The more you know, the more control you’ll have over your finances.
If you have too much debt for the amount you’re paying back, it’s likely that you’ll continue to have that same amount hanging over your head. The best option here is to get rid of the debt that is keeping you in a bad financial situation. Each of your debts has an interest rate attached to it. Therefore, the less you owe to each of those creditors, the less you’re paying in interest.
You’re Not Organized
It’s incredibly easy to get overwhelmed when it comes to money. When you don’t have a system in place, it’s easy to make bad financial decisions. When you don’t have a system in place, you’re more likely to spend money on things other than your basic expenses or to make financial mistakes. From this point on, we’re going to focus on organization. You can’t be organized if you don’t have a system. That system can be as simple as a monthly budget or an Excel spreadsheet. Whatever it is, make it a priority to organize your finances. Make a financial plan, budget and stick to it.
Living Paycheck to Paycheck
If you are living paycheck to paycheck then clearly you don’t have a handle on your finances. This could be due to overspending due to spending on items you don’t need or making a financial plan.
Living in such a situation can be disastrous if you have unexpected expenses or the next paycheck is late. Always build a financial buffer so that even if your paycheck is late or you face unemployment, there is enough to last you to your next paycheck.
Failing to Save Money
Failing to grasp that saving money is vital to financial well-being is a dangerous short-coming. If you understand the need to save money, that’s great! The trick is to take the path that is most likely to lead you to successful saving. There are a number of ways to do this. The most effective method is to put away a percentage of your income. It doesn’t have to be a lot, start small and build a habit of saving a part of your income. There are a number of different savings vehicles that work for this. The most common is a savings account.
Ignoring Retirement Planning
For most young people retirement seems so far in the future that it is easy to ignore it, thinking there is still time for retirement.
The truth is the longer you delay retirement planning the hard you are making it for yourself. Investing in retirement now will ensure that your income has that much longer to accumulate wealth. Open an RRSP (Registered Retirement Savings Plan) and start by putting away as little as $50 a month. This will ensure you start budgeting for retirement.
