Are you spending too much? A weekly trip to the mall, gifts for the kids with or without occasion, using your credit card for every little purchase? If these sound familiar, then it’s time to realize a simple fact – these financial mistakes will sooner or later lead to economic hardship, which is in fact preventable. Here are the eight most common financial mistakes that threaten your financial freedom and keep you from becoming richer.
Making no budget
Planning your budget is the first and most important step to becoming financially independent. While people usually spend more than twenty hours a week watching TV, surfing the net and taking care of their social media profiles, an hour or two spent on planning finances is out of the question. In fact, two hours a week for your money is not a waste of time – it may not be the greatest time you have, but it’s essential.
Spending too much
Many people around the world actually spend more than what they earn. A 2012 survey from Country Financial showed that more than half of the people admit their spending exceeded their income. And only 9 percent of the respondents realized they couldn’t afford such a lifestyle. This means that we often overspend without even seeing it. Blowing the entire paycheck for the month simply means you are spending too much – you need to be able to save at least for a rainy-day fund, vacations, and retirement account.
Saving too little
Although we are all living in the aftermath of the financial crisis from 2008, very few of us have learned their lesson. Saving is a top priority if you want to be wealthy one day, so start with setting up an emergency fund, which can be used in case of an illness, job loss or any unexpected event. Then, continue with allocating small amounts for certain goals – buying a home, buying a car, college money, and so on.
Paying to many fees
Forgetting to return your DVD, paying late your bills, banking fees seem insignificant taken individually. But when we sum them up, the amount of money per year can be overwhelming. To avoid regular penalties and fees, you need to stay organized and try to be more disciplined.
Paying too much debt
According to NedWallet, which analyzes financial products and data, Americans have $846.9 billion in credit card debt. While some debts can help you become rich – mortgage, a student loan or credit to start a business, credit cards with high interest will do just the opposite. Try to pay down the credit cards with the steepest rates first and start paying cash for most of your purchases.
Investing is the only way you can get your money working for you. Once you’ve decided on the sum you will be putting, determine your risk tolerance and consult a qualified financial advisor. The expert will help you choose the type of investment that best fits your goals and circumstances. However, you should start with educating yourself on the subject.
Missing free money
There are great opportunities for getting free money anywhere you look. Don’t let rewards points from the various loyalty programs, credit cards and others expire. Use all promotions, shopping deals, and discounts you can get your hands on. Moreover, there may be money somewhere you completely forgot about. According to the American National Association of Unclaimed Property Administrators, there are over $41 billion worth of unclaimed assets that include old paychecks, tax refunds, forgotten stocks, and so on.
Ignoring additional income opportunities
If you live month to month on your paycheck from your job only, you will never build wealth. The additional income is what can make you richer, so don’t ignore business opportunities and additional work. Nothing is guaranteed, including your job, so if you depend on it for your entire income, one day you may end up in a very unfortunate financial situation.
Making your financial decisions on impulses or need will bring you a trouble sooner or later. You may think you need something, but it doesn’t mean you can afford it. Bad spending habits and the lack of saving ones is the main reason why people always complain about their lifestyle and insufficient income. Always think before you buy something – that’s the first step on the way to wealth.