The choices you make today and the habits that you form now can affect the rest of your financial life.
Personal Finance is still ignored by the education system and it is solely upon you to learn and master the subject. When it comes to personal finances, we all make mistakes. That is how you learn. However, by knowing these mistakes beforehand, you are in a better position to avoid them and stay on track right away.
Here are some of the costliest personal finance mistakes that you want to avoid at all costs -
Excessive spending - Living in the moment and enjoying things solely because you have FOMO or because of YOLO - this can result in spending way more than you should. This forces you to borrow money to meet your necessary expenses, resulting in a pile of debt and negative net worth. It is important to enjoy and indulge in things to treat yourself for your own sanity but the goal is to have the rights balance.
Paycheck to paycheck - Living paycheck to paycheck can be disastrous for your finances. One missed paycheck and you are scrambling for things. What's worse is if you are hit by a job loss or an economic recession. You need to reduce your expenses and increase your income to get rid of surviving on your monthly paychecks. Focus on reducing your expenses first before trying to raise your income levels. Studies have shown that with higher income levels, people just continue to spend more.
You are not investing - There is a saying - If your money is not working for you, then you cannot stop working. It is everyone's goal to retire early and be financially independent. You can reach this goal faster if you start investing. Start small to make it easier, understand the time required for your investment to grow, know how much risk you can tolerate. Ultimately, you can opt for a mix of low-risk to high-risk investments.
Financing big purchases with credit - Credit is easily available today to finance your big purchases and pay in installments which can seem to be a convenient option. However, it also means that you'll end up paying a huge amount of money in the form of interest. This interest you can avoid by choosing to pay in cash instead. Save up and pay as much as you can in cash while using credit wisely.
Having no emergency fund - With no emergency fund, you have no money saved for days or even months where you have no source of income. This will force you to borrow money that will eventually take a while for you to pay it off along with the added interest amount.
Related - 7 ways to keep your impulse purchases in check! 7 warning signs you are living beyond your means!
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