Did your finances take a hit because of the Covid-19 outbreak? Are you living paycheck to paycheck? Inability to manage your money can drive up your debt and ruin your financial future (as well as your business’s). In this post, we’re summarizing personal finance mistakes that you should avoid at all costs.
1. No Budget
Not having a budget can prove to be disastrous. You should track all of your expenses to know where your money is being spent. Once you have an idea, you can create a budget. But just making a budget is not enough, you need to diligently follow it as well.
2. No Debt Plan
Whether you have a mortgage or student loans, or both, it’s crucial to have a debt plan in place. From eliminating smaller debt first to starting with high-interest debt, find a plan that works best for you. A good debt plan will enable you to repay your debt fast.
3. Overlooking Credit Score
Your credit score determines your ability to borrow money. Even if you don’t plan on borrowing money in the near future, you likely will at some point in your lifetime. Your credit score today will affect your loan options in the future when you’re ready to buy a car or house. Having a good credit score will not only help you to take out a loan, but it will also make it easier to rent apartments.
4. Taking Out Payday Loans
Payday loans may seem like a lucrative option, but they can put you in a debt trap. If you are in desperate need of money, consider a payday loan only if you have exhausted every other option.
5. No Financial Advisor
Just because you’ve heard a lot about an investment opportunity, like bitcoin, doesn’t make it the best option for you. You should seek guidance from a financial advisor, like Brad Barros, who can talk through different investment options.
6. Justifying Major Purchases
Stop using the excuse of ‘treating yourself’ to rationalize your frivolous expenses. Instead, take time to think about the aftermath of your decision before deciding to purchase anything expensive.
7. No Distinction Between Personal & Business Finance
If you’ve launched a venture, it’s imperative to separate your personal finances from business capital. Mixing these finances will give a distorted view of your revenue and can make it difficult to keep track of expenses.
8. Overusing Credit Cards
The convenience of credit cards is helpful, but it’s also dangerous. Are you guilty of maxing out your credit cards every month? Try to limit your credit card use to avoid paying high-interest rates, or choose better cards with lower interest rates.
9. Not Discussing Money With Your Partner
If you’re living with your partner or sharing expenses in any way, you must be transparent and clear about money. This is not only necessary for the future of your finances, but it will also help you build and maintain a healthy relationship with your partner.
10. Lending Money
Lending someone money and not getting repaid will damage your finances as well as turn the relationship sour. If you can’t afford to lend out money or you don’t trust the person you’re lending to, pluck up the courage and refuse their request.
Careless spending habits and bad financial decisions can be rectified! To create a secure financial future for you and your family, take an active interest in your everyday finances and grow your wealth by making the most of investment opportunities. Avoid these personal finance mistakes to achieve success and wealth.