10 Common Money Management Mistakes to Avoid
It is a noticeable truth that everyone loves to spend money. In fact, it’s an inarguable truth. Today, people are conscious of how they spend money, and there are quite a number of money tutors on the internet who teach people about money. Some include money Africa, money stack team, motivating your money, money stewards, etc.
For many, they’re faced countless times dealing with finances completely on their own. They are oblivious of how money works hence; they make little or huge money mistakes.
The big question to you would be: what do you do with your money? What’s your saving and spending habits? Living within a budget may not appear to be totally fun, but it’s a lot better than drowning in debts and mismanaging money.
If you can avoid these 10 money mistakes, you’ll be sure to enjoy financial security for the rest of your life.
1. Spending more than you earn
Individuals who spend more than they earn don’t live within their means. To think that everyone is living the best life and trying to meet up with standards can be draining. However, spending beyond your means isn’t sustainable as the bills will always increase.
Be content with what you have. Spend less, and you’ll find financial freedom is much more empowering and gratifying than constantly trying to keep up with others.
2. Not keeping a record of your money
Keeping record of your money gives details and helps raise your awareness of your spending habits. It shows you what you’re doing with your money.
As you spend, keep a record of your money. What items are you buying and how much are you saving? You may think you’re spending less but when you check, you might realize that you’re spending more than you should.
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3. No money goals
The secret to having wealth is simple. Just as with other areas of life, setting money goals is also crucial. Building wealth and financial security don’t happen magically- it takes time and conscious effort.
Setting up financial goals help you stay focused on a target. You need a realistic look into all that you choose to do with your money. If you need to save to buy a house, a car, travel, etc, you will need to set money goals.
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4. Believing financial lies
Do you avoid looking at your bills or financial statements? Do you tell yourself that money will always come? Oh well, it’s easy to console yourself with financial lies and be blinded to the truth.
As humans, we hope for the best always. We believe things will get better and our money management will improve when we get the things we desire. The problem is, this mindset blinds us to the reality of our money habits. Always take an honest assessment of your finances.
5. Incurring debts
There’s the luxury lifestyle people love to portray. Don’t join the wagon! Going into debt for a fancy car, a big house, tours, etc is a waste of money on something that will quickly depreciate; especially if it’s not an important need at the time. Instead, invest the money and it’ll yield returns.
Going into debt for something you desperately want should be well thought through. Trust me, you can always wait till you can afford it with ease.
6. Careless spending
Ever heard of impulse buying? Maybe we’re guilty of it. Chances are that you buy something you didn’t plan for. If you do, it’s time to stop the habit.
If you need to spend money, make a list of the things you need. Limit your expenditure on items you didn’t budget for.
7. Settling the wrong debts first
It’s your responsibility to pay off your debts, but you may lack a direction on where to begin. Financial experts recommend paying off the debts with the highest rate first.
Debt doesn’t boost your financial situation and it includes credit cards, personal bank loans, and automobile loans. Remember, too much debt attached to your name doesn’t help your credit score and this could debar you from getting those important loans in the future.
8. Not having a cash flow projection
By effectively managing your cash flow you could be in a better financial position. Understanding what your cash flow is likely to be in the future is just as critical as knowing what it is now.
Most of the time, cash flow problems can be predicted if you simply anticipate and plan for future expenses. In order to maintain healthy cash flow, you need to see money flowing into your ‘account’ It’s only wise to project your cash flow.
9. No emergency funds
An emergency is an unexpected situation that calls for immediate action. Emergencies can happen to anyone at any time. Unforeseen circumstances like a job loss, car-repair bill, illness, etc should be planned for. An emergency fund can protect you from crippling debts.
Include your emergency fund in your budget until it’s fully funded. Many financial experts suggest saving at least three months’ worth of salary.
10. Saving whatever is left at the end of the month
Usually, there’s no money left to save after spending. Instead, have your savings automatically set aside before you even have a chance to spend it. The easiest way to do that is in your employer’s retirement plan since it’s deducted right out of your paycheck. If you think this amount saved will not be enough, you can always automate your savings by yourself into a separate account.
Money management is an important area in life that a lot of people struggle with. However, I hope you avoid these mistakes explained in this article.