No one is born a financially savvy individual and we can all make some bad decisions. However, there are some common mistakes that people make that can be avoided.
Here are four financial mistakes that can cost you, and how to avoid them.
1. Spending the Money You Don’t Have
We have all been tempted to buy something we want in the spur of the moment. However, impulse buys often stretch our budget beyond what it should be.
When we are overspending it is a downward spiral to try and get caught up. It is not just those emotional buys that can hinder our financial health, but even everyday purchases that we can do without can impact our income.
When times are tight even one dollar a day can make a big difference. Try and think through purchases and any spending decisions you need to make.
Is it really something you need? For example, a gym membership is a nice lifestyle treat but ask yourself if you really need to be making monthly payments on something you will never own.
2. Lack of Savings
Investopedia notes that household savings were at three percent in March 2018. This means that most people are living paycheck to paycheck.
It’s these tough financial situations that led to the founding of personal loan providers like SkyCap Financial, a company that specializes in alternative financing for Canadians. When an unexpected cost comes up, families that don’t have savings to dip into.
Whether there is a medical emergency, car repairs needed or some other situation that requires money immediately, it will break them. A sound financial plan is to put a little away into an emergency savings fund so that when these incidents come up, you have some breathing room.
3. No budget
A budget is really just a plan for your finances, and a strategy is how you achieve your goals.
By tracking how much you spend in every area of your life you will be better equipped to know what you can cut out. This is the beginning of financial security as it helps you develop a healthy attitude towards money.
Keep in mind that budgets are not perfect and will need to be adjusted as you go, but having a plan in place gives you the flexibility you’ll need to succeed.
4. Tackling Debt Incorrectly
Anyone hoping to get out of debt needs to do more than just pay the minimum monthly payment. One of the best strategies is the snowball method.
Using this plan, debt holders pay the minimum monthly payments on all their debt. If they are able, they pay a little extra on the one that has the least amount owing.
Then, once that debt is paid off, redirect the money towards the next smallest amount. In this way, you are able to pay off the debt slowly by focusing on the account that you owe the least on.