Having a good financial management, may it be personal or your business, is everyone’s goal. I mean who doesn’t? With many cases of fraud, bankruptcy and other financial problems nowadays, more people are investing time and money in good and accurate financial management. Here are five financial mistakes you need to avoid right now- to have a happy and secured financial management.
Financial Management: Avoid the Financial Mistakes
You don’t have an emergency fund
We tend to enjoy too much in life that sometimes, we lose focus on things that are important- and this includes having an emergency fund. You might think that you won’t need it right now maybe because you’re still young, or you still have a lot of money, what could happen? But life is unpredictable. As early as now, start saving up for an emergency fund, trust me you’ll need it sooner or later.
Saving only ‘what’s left’ in your savings
Another problem why people can’t figure out how to save money because they do it backwards. They spend what they want and pay all you can, and to compensate for it, they try to save what is left in their bank accounts. The right way to save is to pay yourself first, instead of spending first. Try to send money into your savings account every payday to avoid shortchanging yourself.
Another solution is to have monthly budget- this is the right way to prioritize things that you need to pay every month, like bills, rent, phone plans etc. Having a guide in your spending means saving money and avoid too much spending on unnecessary things.
Not saving for your retirement early
Saving up for your retirement as early as now is important- because if not, it can take a lot of time to build up enough cash to retire. There are many ways to you can save, like for example the 401k plan for US citizens. They save for their retirement by saving a percentage of their income every year, and their retirement contributions increases automatically as their earnings increase. Try to research other ways that will fit in your preferences in saving money for your retirement- it is better to be early than to be sorry later on.
Buying a new Car
With millions of new cars are released and sold each year, it’s no wonder that more people are buying new cars. However, this is one of the common financial mistakes committed by many because many people cannot afford the car by cash, but still pay for them by borrowing money. By borrowing money to buy a car, the person pays interest on a depreciating asset, which amplifies the difference between the value of the car and the price paid for it.
Many people also trade in their cars every two or three years and unfortunately, lose money on every trade. Buying a car may cause you to lose a lot of money- if you are not smart and careful enough. You will also have to pay for the car maintenance yearly, fuel and other things that your car needs. If needing a car is a priority right now, be practical- buy a car that uses less gas and costs less in insurance and maintenance.
Not having a financial plan
This mistake is actually the summary of all the mentioned mistakes above- you’ll likely to commit those mistakes if you don’t have a firm financial plan. Many people are trying to search ways to improve their finances on the internet, however they stop right there. Making a financial plan takes a lot of focus and hardwork start making it right now.
These are just some of the common financial mistakes and there are still many out there- don’t wait to let it happen to you. Start planning, start spending wisely and you’ll have a happy and secured financial health in no time.