Learning to manage finances at a young age is of utmost importance as failure to start will lead to financial problems in the nearest future.
To avoid financial troubles in the future, here are some money mistakes to check.
1. Living without a budget
This is money management 101. At every stage of your life, you must have a plan for your money and how you'll spend and invest it. You may not always stick to your budget — life happens, after all — but without one, you'll never achieve financial security.
It's usually not one big financial catastrophe that ruins your long-term security, it's continually living above your means and failing to curb unnecessary spending.
Unnecessary spending comes in two flavors: overbuying the big things (houses, cars, even college educations) and nickel-and-diming your budget to death by compulsive spending on things like dining out, clothing or home furnishings.
No matter how much you're earning, create a budget to live within your means, and update it whenever there's a change in your financial situation. Discipline yourself (and your spouse, if you're married) to stick to it by recording your income and expenses every month.
2. Living above your means
Preventing yourself from overspending is one way to to stop worrying about your finances.
To keep your finances in order, you’ve really got to live on less money than you make. That means you'll need to have a side hustle to increase your income or spend on items and services that are not above the line of your income. Whichever you choose, make sure you are not spending above your means.
3. Spending every dime
Do not spend all your income all at once. It is a very grave mistake to squander all your earnings. Poverty lurks around the corner, spending all the money you earn. You end up borrowing from family and friends even before you get your next income and when next you get paid, you have to keep settling debt and the cycle continues.
4. Borrowing Money
When you are in a tight financial situation, you may be tempted to borrow money from your friends or your family. When you do this, you put a strain on your relationship with them. They may begin to question your financial decisions and feel like they can make comments about your spending habits.
They may also need the money back suddenly or you may feel guilty whenever you see them. It's a good rule of thumb to avoid loaning money to family or friends or risk damaging the relationship.
5. No retirement plan
It is a big mistake not to have a retirement plan. Saving for the future is always seen as a very big hurdle because it seems too far to start saving for old age while there is so much to spend money on now. A Higher value is placed on short-term than long-term goals, which is more important. The earlier you start saving, the less there is to save for old age.
6. Failing to save extra money for emergencies
As your family and commitments grow, so does your need to plan for unexpected emergencies. While we don’t want you to panic, a couple of hundred bucks in your high interest savings account won’t cut it anymore. You have increased responsibilities and your emergency fund should reflect that. Adjust the size of the pot and plan to have about six month’s worth of living expenses, including mortgage payments, put away in a safe place that you won’t be tempted to take back from.
Your 30s and 40s can be a wonderful time of life when your family grows, alongside your income, travel, household items and future possibility. By making sure you avoid these common money mistakes, you’ll quickly take charge of your finances and still have plenty of time to achieve your financial goals.
7. Ignoring your insurance
Many people choose to go without insurance to save money. But this isn't a wise financial decision. That's because your car or health insurance is your safety net. It protects you in the event that you're in a major accident or have to deal with a serious health issue. In fact, one study found that 530,000 bankruptcies each year can be attributed to medical bills
Make sure you have basic health insurance coverage, as well as car insurance. Keep in mind that many states require car insurance by law.
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