No matter your age, if you are serious about building long-lasting wealth, money management should be one of your top priorities. As you probably know, the education system does not do a great job preparing people in this regards. So, with the impact of COVID-19, it is more important to be financially aware. And this includes being in charge of your finance. This article will share some money mistakes everyone should avoid today.
1. Having too many credit cards
While having a few credit cards can help you build up your credit score, too many can lead to debt. Using your credit cards to finance your vacations or buy things you don’t need is an unhealthy financial habit. If you can’t pay off the balance on your credit cards every month, you may end up accumulating a lot of debt.
carrying a balance on multiple credit cards can quickly spiral out of control.
To avoid this kind of situation, use a single credit card to make your purchases and pay the balance in full each month.
2. Not keeping a money diary
Our bank account statement appears misleading without proper recording. A lot passes through our hands without us realizing how much we have at our disposal. This makes it difficult to re-order our finances and ultimately our lives. The consequences are nights of frustrating dreams. This unfortunately is also a striving against the wind, as you simply cannot keep track of all the expenses in your head.
Knowing how much you are spending, rather than relying on overly simplistic formulas or vague estimates, is the best way to estimate how much you are likely to spend in retirement and how much you need to save now.
3. Not having a budget
Budgeting is one of the ways to take charge of your finance. It can help you to manage your expenses or even pay off any debt you may have. In addition, it can help you to be aware of your financial habits. Without the knowledge of what is coming in and out, it is easy to spend frivolously. Having a budget can help you to be in charge by changing small habits like picking up your take out instead of having it delivered. If you don’t know how to go about this, you can read out previous article on how to create a working budget. Managing your money will only get more complicated as you get older. So, the habit now.
4. Not Paying Yourself first
Building up a savings, emergency fund and planning for retirement is as essential as ever right now. So, it is important to set aside a portion of your paycheck for your savings fund. You may be struggling with this at the moment but the secret is to “pay yourself first.” The first “bill” you pay each month is to yourself. Shifting your focus each month to a “pay yourself first” mentality is subtle, but it can potentially be life changing.
Let’s say, for example, you make $3,000 per month after taxes. You would put aside $300 (10%) right off the bat, leaving you $2,700 for the rest of your bills.
This tactic makes saving $300 per month a certainty.
You can also put money away in an emergency saving fund. Not saving for emergencies may leave you vulnerable to relying on credit cards or another high-interest lending to pay for an emergency.
5. Not having an investment account
Building long-lasting wealth and securing your financial future may take more than just a good salary. This is where paying yourself first and investing can play a role. Once you consistently set aside money every month to pay yourself first, you should focus on investing the money in your saving account. You can start by opening a TFSA and also investing in mutual fund. You can use your TFSA to invest in a low-fee, diversified equity index fund and continue to invest consistently irrespective of the performance of the market. Your focus should be on the long term.
6. Buying on impulse
This is one of my favorite money mistakes everyone should avoid today. At all cost, avoid buying on impulse and trying to look rich instead of building wealth. This is where having a working budget becomes useful. Plan for everything you buy. So, think about spending your money first on saving and investing to build wealth. Then, you can spend the money you make through investments on the things you want.
7. Not shopping around for deals
Shopping around for deals can save you a lot of money. In fact, you can save a lot of money for the best deal on purchases like a car, cell phone provider, insurance, etc. So, spend more time comparing quotes and prices. You can even snatch a deal you find elsewhere and use it as leverage for a better price with your preferred retailer. Services like Rakuten and JoinHoney can help you to save a lot on your online purchases. Why not sign up for them today and start taking advantage of what they offer.
Are there any other money mistakes you believe people are making? We will like to hear from you on this. So, join our community and share your thoughts.
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