Are You Making These Common Financial Mistakes?
Financial management is a subject they don’t teach you in school. Personal finance can be complicated and not to mention stressful when concepts like investment, interest and debt become customary. Some of us manage money well with a frugal and organised nature; others adopt these habits from our parents. Of course some of us struggle with personal finance disregarding it as a boring and a time consuming hassle. If you are one of these people it is important to be aware of the huge financial mistakes that you could be making or may make in the future.
Paying off debt with savings
Debt payments should always be your first priority but this doesn’t mean to say you should abandon your savings account. Saving is an important foundation for your future and even the most disciplined budgeters struggle to rebuild drained savings accounts. Make a budget that includes both debt payment and savings, even if it is only a small amount.
Not building an a emergency fund
You should aim to have approximately $1000 in an emergency fund to pay for minor emergency expenses such as medical bills or car repairs. Emergency funds decrease the likelihood of more debt as you have your own expenses to fall back on during financial shortfalls.
Many of us avoid this payment; however, insurance should be viewed as a smart investment. Huge expenses can occur at the worst of times and are often unexpected and beyond our control; how else are you going to afford these expenses without insurance? Your bank account could be drained overnight, landing you in a very stressful financial situation.
Living off borrowed money
If you’re living off borrowed money, you are probably paying around double the amount for purchases. Loans should be for emergency expenses or investments only. Create a personal budget to ensure you are not spending more than you can afford. Debt payments, bills and savings should always come first when payday comes around.
Many of us adopt the mentality that we are stuck in debt for the rest of our lives. Like all other goals, financial goals can be achieved with a positive attitude, a good plan, hard work and most importantly, time.