There’s not a single soul in this world who can honestly say they’ve never made a poor financial decision in their lives. The truth is that managing personal finances is anything but easy. Usually, financial education is not something that you learn about in school – unless you choose to study economy or other money related subjects – so when you become an adult you go out into the real world with very little information on the topic.
We’re not properly equipped to handle our finances. Most people learn how to manage their money the hard way, by making one mistake after another and trying not to repeat them in the future. Some succeed and some continue the same poor financial patterns for years on end.
We don’t want to shame anyone for their uninspired financial decisions or bad spending habits. We’ve all been there and done that. But we believe there’s always plenty of room for improvement. That’s why we invite you to take a look at some of the most common financial mistakes people make and see how many of them you check off the list. Then you can read about how you can avoid them as well.
Not knowing your numbers
You have your incomes and you have your expenses. But do you know how much money comes in and how much money you spend on monthly bills and other common expenses? If you don’t, you’ve got a problem right there.
Even if you have a well-paying job and your current financial situation is great, you can’t just leave everything up to chance. If you don’t stay on top of your finances, you might start spending more than you’re earning without realizing. So, grab a pen and paper and make a detailed list of all your revenues and expenses. That will help you figure out how much you can afford to spend, so you can create a monthly budget. Make sure you stick to that budget and refrain from making additional expenses.
Not thinking about the future
A monthly salary can create a false sense of financial stability. You know that each month a certain amount of money will enter your account, so you don’t stress much about the future. Then you spend all your wage and wait down to the very last penny and wait for the next one and so on.
Living paycheck to paycheck has become a lifestyle for many people, but that way of spending your money puts you at great financial risk. You never know when an unforeseen event might disrupt your life and mess up your financial plans – or better said your lack of financial planning. In order to avoid these unpleasant scenarios, you have to start thinking about the future and create a long-term financial plan. Create a security blanket and try to put money aside for unexpected expenses. So, if anything should happen, you’ll still have enough money to live comfortably.
Relying on money that you don’t actually have
The prospect of earning a certain amount of money in the future can make a lot of people daydream about how they’re going to spend them, and some might even start spending before they receive the money. Waiting for an inheritance or waiting for someone to pay back the money they’ve borrowed from you can lead to such situations.
However, you should never rely on money that you don’t have. There’s no guarantee that you’ll ever see that money into your account, so when you’re calculating your budget, only include the money that you actually have. That will save you lots of disappointments and money problems in the long run.
Borrowing more money than you can pay back
Sometimes, no matter how good you are at budgeting and managing your finances, money problems can still rear their ugly head. And when that happens, borrowing money is one of the options you have to restore financial wellbeing.
But keep in mind that when you make a loan you also have to pay it back. So, make sure you choose a loan that you can actually afford and not one that will deepen your financial crisis. The smartest thing to do is search for online loans Canada and do some shopping around before you decide on what type of loan suits you best.
Making risky investments
Investing is a good idea if you want to improve your financial situation and build wealth. But not all investments are created equal. In fact, there are some investments that you should refrain from considering, if you want to stay out of trouble. We’re talking about the very risky ones.
While there’s no such thing as a risk-free investment, some are much safer than others. So, unless you can afford to lose your hard-earned money on risky financial moves, we suggest you take the safer route and stick to low-risks investments.
Spending too much on life’s little pleasures
All this calculating and budgeting can become dull and tiring at some point. You can allow yourself to make some unplanned expenses every now and then, but try not to go from one extreme to the other. Way too many people end up in financial distress because they go overboard with frivolous spending.
You can still enjoy life’s little pleasures without leaving a hole in your bank account. All you have to do is put some money aside for pleasure spending, so you can treat yourself from time to time and not feel guilty about it.
Not paying your debts on time
Do you have a mortgage loan or any other type of debt that you have to pay? Ignoring it won’t make it go away. So, before you start spending money, make sure you’ve covered your debts first. Do things the other way around and one day you might realize that you don’t have the necessary resources to pay back your debts.
The golden rule here is to set your financial priorities straight and make sure you put debt payments at the very top. Then you can spend the rest of the money as you see fit.
Proper money management can be difficult, but it’s not exactly rocket science either. Try to get educated on the topic and adopt healthy financial habits as you go, and most of your money problems will be solved.