Making financial mistakes are just a part of everyday life. The problem is that they can add up over time and create financial challenges for you. Discover the top financial mistakes people make so you can avoid them to not only help your bank account, but your success as well.
Financial challenges do not typically happen overnight. They are habits that have developed over time. Your money is often lost one dollar at a time with bad spending habits and decision-making. Now I’m going to give you some of the many most common financial mistakes that often lead people to major financial problems. But, even if you’re already facing financial difficulties, having the knowledge of these mistakes can help you plan for a better future.
1. Poor Spending Habits
It’s the small purchases that do the damage. In your head you’re telling yourself, buying a lot of cheap things is better than buying a couple expensive things. But in reality, buying the cheap things are doing more damage than the expensive. Buying small things like cigarettes, coffee, or your Hulu subscription can easily add up significantly over time. If you’re going through financial challenges, it is critical that you learn to budget and decrease your excessive and frivolous spending on things that are not necessary in your life.
2. Living Paycheck to Paycheck
This has to be the most common problems when it comes to financial mistakes. Living check to check is when your income is equal to your expenses. For example, imagine you’re making $20,000 a month at your job. But you live in a house that costs $10,000 a month, your car payment is $10,000 a month also. Even though you’re making good money, you have nothing to show for it because you are stuck in a continuous cycle of “make money and pay bills” over and over again until you get old. You need to focus on developing assets and eliminating liabilities. (To learn more about assets, liabilities, income, and expenses to become financially free I highly recommend the book Rich Dad Poor Dad.
3. Not Making Investments
By investing your money, you are having your money work for you. That is the key to being financially successful, you need to have your money working for you. And if you don’t have your money working for you will work and never ever stop working. Building an investment portfolio is important. Whether it be investing in yourself (buying books, educational courses, get a mentor and attend seminars), stocks, or anything else. Making monthly contributions to your investment portfolio builds assets for you. Therefore putting you on the road to financial freedom.
4. Having A Large Number of Payments
Monthly payments can accumulate over time. Before committing to making an addition to your monthly payment list, ask yourself, “Do I really need this?”. Payments like gym memberships, Netflix, magazine subscriptions, apps on your phone are all things that you need to ask yourself that question before committing. If you aren’t going to the gym anymore, cancel the membership and figure out efficient ways to exercise at home. If you have cable, you don’t need Netflix too. If the magazines just end up somewhere around your house or in the trash, cancel the subscription. Too many payments can put a dent in your income. When you want to save more and have more money to INVEST, you need to eliminate some expenses such as those.
5. Using Credit Cards for Daily Expenses
Credit card debt can be a slippery slope that can be very challenging to get out of. In most cases, people tend to spend more money when they are using a credit card to pay. When you don’t make your payments on time, they increase the amount you need to pay each month and that messes up your credit score. So don’t use your credit card for daily expenses and for things you can’t afford.
It is important to have a plan that can help set you up for financial success. Start by monitoring the little expenses that add up quickly, then move on to monitoring the big expenses. You have to hold yourself accountable to only purchasing items you can afford, rather than making purchases based on wants.