Managing personal finances or rather learning to manage personal finance is a huge part of ‘adulting’. Like it or not, we won’t always have caring parents and responsible siblings taking care of us all the time. Managing our finances properly is a big step towards an independent life, for everyone. In fact, if you manage your earnings effectively, you effectively use your money and also save a lot for the future. Therefore, managing personal finances is a skill that you must learn as early as possible. But we all make mistakes in managing our expenses. And to help you with it, here are 10 MAJOR Personal Finance Mistakes to Avoid, at any cost.
Personal Finance Mistakes to Avoid
#1 – No monthly budget
If you are a newbie out of home for the first time, this is for YOU. If you are someone who doesn’t track their expenses/keep a monthly budget, then start doing it. Just spending extravagantly will bring in a lot of stress and embarrassment. Not tracking your expenses will soon land you in trouble.
You should always maintain a monthly budget book. Practice this habit and you will be surprised to see by the amount you are saving. I learned it the hard way. You must learn from my mistake.
#2 – No emergency funds
Problems come unannounced in our life, always. It is important to set aside some money for emergency times. Maybe you need to cut some of your lesser needful things from your expenses list. OR maybe you’d notice that you have been spending quite a lot on unnecessary items! Trust me, it might be difficult to not buy something tempting and save money for emergency times BUT it saves you from a lot of mental pressure and embarrassing scenes.
#3 – Unnecessary expenses
Sometimes we buy things not because we need it. Sounds familiar? Yes, sometimes we buy just to just show-off our wealth. Hearing compliments from others can be a pleasant thing but it is temporary. Always remember there are very few people that help you when you are financially broke and it is better to cut these unnecessary expenses from the list than to regret later.
“Beware of little expenses. A small leak will sink a great ship.” – Benjamin Franklin
And that brings me to my next point – Credit cards.
#4 – Excessive use of credit cards
Shopping trendy items is a weakness and tempting of a lot of people. Nothing can be worse than having a credit card with shopaholic people. Credit cards let you spend extravagantly while you are burdened with a huge amount of debt, unconsciously.
Your solution? Do NOT take your debit cards and credit cards while shopping. Instead set up a budget and take the amount in the form of cash. This will prevent you from spending lavishly. This one step will help you a lot.
#5 – No insurance
Another major Personal Finance Mistakes to Avoid for youngsters with a happy-go-lucky attitude. Future is unpredictable. You should also prepare yourself for bad times too. Invest your money in health insurance, or life insurance, etc. It is always advisable to take some steps to secure your and family’s future. Also, it saves you from paying a huge same if unfortunately, you have to face a bad time.
#6 – No plans for post-retirement
“Na Biwi na bacha na baap bada na maiya, the whole thing is that bhaiya sabse bada rupaiya”
We all have heard this popular song but haven’t realized that it is the harsh reality of today’s world. You can’t trust anyone in money matters. Therefore, it is good to save for your old age days than to beg in front of someone.
For all those Gen Y and Gen X people, please think about life post-retirement.
#7 – No savings
It is the most major personal finance mistakes to avoid for a youngster. Almost every youth does this as they start earning. We all are excited to buy gifts for our loved ones, upgrade our lifestyle as soon as we start getting our salary. But as early you start saving it will be helpful for you in future or any emergency.
“A penny saved is a penny earned.” – Benjamin Franklin
#8 – Investing without knowledge
People who trust easily are trapped by the various investing scams. They end up losing their hard-earned money. Never invest in anything you don’t know about. You can consult some financial experts but still make your money-decision wisely.
We know that the thing your colleague does to save money sounds amazing. We know that you want to take a vacation like your friend. BUT, It is better to not earn any profit than to lose all your money, right?
#9 – Ignoring the tax amount
A large amount of our income goes to the tax department. It is important to track your tax amounts and try to collect every information regarding various tax-exemption policies by the government.
#10 – Spending lavishly at weddings
In India, a simple wedding or a royal wedding, people always point out flaws. It is time to change the mindset. Stop pushing the bride side for a lavish wedding and burdening them with huge loans. After all, it is the love, understanding and trust between families that will make their bond stronger and not the expensive clothes, décor, food etc.
Also, consider if it is your own wedding or not! Why should you wear a crazily expensive and uncomfortable attire that your acquaintance’s family would approve of?
I hope that these tips on ‘Personal Finance Mistakes to Avoid’ will prove helpful for you. You would soon become a master in managing your expenses. Remember that it is okay to ask – How to manage personal finance?
To read more about personal finances and related tips, visit our blogs on personal finances. After all, better than ask than regret, isn’t it?