Money management is a very tricky subject to achieve which can only be learnt over the period of time. From college loans to jobs which don’t pay well, these problems are common in the initial phase of adult life. While in the process of learning to achieve the financial expertise one tends to make many money mistakes over the time period.
Another fact is, that making money mistakes can happen at any given point of time in a life if one is not cautious enough towards it. After various researches done over a period of time, the experts have observed the common financial errors that people tend to make in general.
Common Money Mistakes Anyone Can Make:
1. Not clearing the education loan early:
One of the major debt is of student loan. While most of the students struggle in paying their college loan. The majority of the college graduates when start their jobs tend to live a luxurious life on their new salaries, hence, paying their loans takes years. If these young college graduates lower their expenses and live a simple life initially while paying their loan as their priority, they will save a lot of money.
2. Missing out on college:
A college graduate is paid more than a high school graduate which eventually doubles up after completing their graduate degree. One should not underestimate the power of a graduate, especially in the job market.
Employers tend to give preferences to the ones with the higher education when it comes to increment and paying the initial salary. Starting your professional life will be better with a college degree which will provide you benefits for a longer period of time.
3. Using the maximum limit of credit card:
The importance of credit card is to use during the emergency in the places of utmost importance. But most of the people take these benefits in a wrong way and use the maximum limit of their credit card. This limit then tends to become a huge burden since paying the bill, later on, is a huge task. In fact, it adds up to the more money than the actual amount.
4. No insurance plan:
When you start working it is of utmost important that you plan for your insurance. During the health emergency, this insurance will help to save you from the addtional expenditure. These insurances also cover up the sudden concerns of money if in case they arise. The majority of people do not understand the importance of health insurance and later during the sudden tragedies of accidents, they tend to have financial trouble.
5. No investment plan:
Most of the people tend to have the philosophy that they will never grow old or fall sick. In such a case, many people do not plan for their retirement or make any other essential investment planning.
It is good to sooner start working towards your retirement funds and learn more about various financial plan and schemes of saving money. Invest in various tax saving plans and other deposits. These saving strategies, when done even in small amount, leads up to the bigger value later on.
6. Lack of negotiation for a job:
To get good money in a job later on better to start earning more money initially. Most of the freshers are scared to negotiate salary and perks in a job, they take the first offer that tends to come up to them without discussing it.
There is always a window of negotiation and the hiring department is always looking for it. Hence, try negotiating the salary when getting in the job market, before that learn all about the industry standards also. Know your professional skills are worth for and ask accordingly.
7. Rewarding self:
If you have achieved something big then it is better to reward yourself with a nice vacation or an occasional night out as this will help you to refreshen up for further ahead.
But indulging into gambling, substance abuse or impulse shopping makes all the hard earned money go away easily. These are not beneficial for anyone nor healthwise, nor do they provide mental peace. But surely they add up to a lot of stress on mind and pocket.
8. Not paying taxes on time:
Paying taxes on time is extremely essential, people who do not understand the consequences of it add up for later. Filing the correct tax information duly on time prevents any kind of legal action that can be taken.
If the tax department finds out the discrepancies in your tax payment they will add the fine, this value will be quite high from the actual amount. In fact, this matter can get so serious that it can lead to your property and personal assets seized by the government.
9. Lack of financial advisor:
The importance of a financial advisor is equivalent to a family physician. They are the ones who know the best of your finances and can guide you to save it up for a longer term and can explain you various ways with which you can save money. Having a good and qualified financial advisor prevents one from committing any kind of money mistakes and finding the solution at the right time.
10. The habit of buying new:
Know your exact requirement and make your purchase accordingly. For Example, if you need a car to travel then it is better to buy a second-hand car than the brand new one. Since the value of the car depreciates immediately from the time of purchase. This is also true for everything you buy, hence, be smart and purchase things which are almost new and save extra money.
11. Not taking up the provident fund:
This is kind of the free money offered by the employer, where they pay the same amount of money that you will be investing in it. This is a highly profitable saving for anyone and comes with various advantages.
Though many people do not realise the importance of this and prevent from applying for provident funds. Many times people tend to stay in a job for a longer period of time and tend to miss out on the huge saving by not participating in it.
12. Late bill payments:
The habitual habit of paying the bills late is frequent in most of the people. While there is always an additional fee to be paid on the late bill payment. Prevent yourself from this habit since if you start calculating the amount fo extra money you are paying every month, then you will realise how much money you are wasting and the possibility of the money you can invest into something better. Hence, schedule your bill payment before the due date.
13. Lack of emergency funds:
Always plan for your emergency funds which can be used at any given point of time. The importance of these emergency funds keeps you up and ready for any sudden unknown issue that can come up.
This is also the fund which will always be there in your account and will never let you live cashlessly. You will understand the benefit of it once you are in a trouble and realise it while using this money.
14. Living beyond your means:
Living an extravagant life beyond your means always land up into trouble. Know your financial conditions before you jump into living the larger than life scenario. If your means of living are modest better to live that way and save money for future.
Also, living within your means will prevent you from any kind of financial dependency on anyone. This will give your power to make your own life choices.
15. Lack of future planning:
Good analytical thinking for the future will help you lead a better lifestyle, where you can save a lot of money by avoiding any impulse purchase. One tends to get stuck in the social pressure of showing themselves better than others in a materialistic way but if one looks for long term benefits then will prevent themselves from this social pressure. Better to surround yourself with people who think on long term basis .
16. Borrowing money:
If you have the habit of borrowing money from friends and family to live your exorbitant lifestyle then it is better to stop it as soon as possible. Borrowing money is another form which deepens the hole in your pocket and allows your finances to become weak. Since when the time comes to pay them back then all is gone in one shot, therefore, prevent from such activities and better to live a life within your own means.
17. Lack of multiple sources of investments:
It is a general tendency that if a person invests in something and it is doing well for a longer period of time then they put all of their money into it. But this is a risky approach while savings since nothing is guaranteed forever. Therefore, decide to a limit and invest in one scheme also look for other money saving options and invest in them. Do not put all your money into single investment rather spread it across various other sources.
18. Purchasing a house:
Buying a bigger house does not mean a necessary requirement too. Understand your actual needs and requirements and then plan to buy a house accordingly. A bigger house will lead to a larger amount of tax, spending too much on maintenance, probably you might need a help for it too. This will have a harmful effect to your savings and finances in a long-term.
19. Extravagant marriage expenditures:
Having a dream wedding is everyone’s deepest heart desire. But taking loans to marry is not worth it or spending all your savings in it. This is one of the most common mistakes people tend to make. It is good to be realistic and plan your budget for the wedding then with some good research know what all can be done within it. One can save a lot of money if spent properly on their weddings.
20. Money as the main objective:
Money is essential for sure and there is no doubt about it. But it will be far more beneficial if you choose a career path which interest you and learn all the skills of that industry. Create your value and then demand the right price for your knowledge. This will not only keep you happy and you will get to enjoy your work also.
21. Paying college loans too early:
Clearing your college loans early is definitely a good thing but even that should be done with a proper planning. Let not loan payment be your sole ambition while earning your income, plan in such a way that you are able to put some part of the money to your investment plans or for retirement funds or, at least, save some for emergency funds. Imagine getting all your loan cleared, you are still left with nothing as a saving hence, you might feel all your hard work has gone into vain.
22. Gain knowledge:
Understand the various financial jargons, collect the information of the various money saving schemes that are there. Talk to people who are expert in this field and do not hesitate to put up your queries to them. Know your goals and set out a realistic plan for your savings. A good knowledge will take you quite far.
Prevent yourself from making any kind of money mistakes, even the common ones as stated above. Building your financial backup is better if one start doing it early in a career as it will lead to the better finances in later stages. It is good to talk to experienced people or even to your parents to understand the benefits of savings and learn the tricks of how they have saved money in their life. Pick out the best method for you and start doing it.