You work hard to earn money and make several sacrifices so that your family can live a decent lifestyle. However, what you do with that money and where you put it can make a whole lot of difference to your financial well-being. Unfortunately, most of us are not equipped with the right knowledge to make smart financial choices.
Due to this, we end up making unintentional financial mistakes that may cost us a lot of money in the long run. Let’s look at some of these in detail.
You may be earning good money or may not have many responsibilities currently. However, there is never a reason good enough to spend recklessly. You may indulge once in a while but constant overspending may become a habit before you know it. It may be time to learn a lesson or two from Rebecca Bloomwood from Confessions of a Shopaholic. Try to put every extra dollar toward repaying your student loan instead of buying things you don’t need. Even better is to save it for your future.
Living on credit cards
Plastic money has made paying for expenses much easier but it has also caused several people to live off the edge. Credit cards are good till the time you use them responsibly. They help you in building a good credit score. However, you have got a problem if you are maxing out your credit cards and swiping like there is no tomorrow. The interest rates are steep and may land you in a deep pit of debt. It is advisable to use cash if you cannot control your expenses when using credit cards.
Spending too much on a car or a house
Are you a car junkie and buy a new car every two to three years? Well, you may be shocked to know that you are losing more money in this process than you can account for. A car is a depreciating asset and loses its value as soon as you bring it home. It is recommended to buy a car only when the need is real or when you have collected at least fifty percent of its value in cash. Similarly, when you start looking at real estate properties, it is not difficult to get swayed by a swimming pool or a great location. Many people end up buying something that can’t afford it. They realize it only after the deal has been struck and they can’t manage the repayments. Besides, a house comes with its own set of auxiliary expenses like taxes, maintenance, and repairs.
If you are saving money every month, you are only half there. While it is a good start, there is no point in keeping your money in the bank accounts. You need to invest it to make more money in the long term. There are several investment options in the market that you can choose from. For instance, if you are in a position to take risks, you may consider stock markets and mutual funds. If not, you can go with government bonds and deposits. Secondly, try to contribute to retirement plans as much as you can. The more you play, the more will be your employer’s contribution. That is like free money you can save for an easy and smooth retirement life.
Not having a good credit score
Accessing your credit report is as simple as hitting your computer button. Have a look at it to know if you need to work on it. With a good credit score, you can get cheap loans and save a significant amount on the interest rates.
Not planning for the future
Do you believe in living in the moment? Well, it may sound exciting and adventurous but it may be reckless for your future self. Impulsive money decisions and not budgeting for your expenses are some mistakes that may land you in a soup. You never know what the future holds for you. During emergencies, it is way better to have your own funds instead of knocking the doors of friends or family. Approaching lenders like banks would make matters even worse as you will end up paying more due to high-interest rates.