4 Financial Mistakes To Learn From

Everyone makes mistakes. But what is more important is not to repeat them. If you are not learning from your mistakes then you will continue to land up in the same mess again and again. I’ve seen many people struggling with their personal finances. Based on my observations, either they have some pre-defined notions about finance or they would follow what their peers do or just follow the trend.

Finance means different to different people. But what is more important is what it means to you. Are you saving some money at all? Are you saving for short-term or long-term? Are you investing some money? Are you over spending?

Here are the most common financial mistakes that I’ve observed people make which can help us learn from.

Mistake #1: Using that little plastic card to get what you want

Let’s start off with the number one mistake. This is probably the most common mistake today. Almost every person today has a credit card. It is almost like a right of passage when you turn eighteen. Credit card debt is the fastest way to ruin your finances. It is easy to acquire and difficult to pay off.

Paying the credit call bill with the minimum balance option doesn’t pay off enough of your outstanding balance to help you. You might land up paying on your outstanding’s for months or years. Even a thousand rupee balance can take you months to pay off if you simply make the minimum payment.

Don’t forget the interest rate, it rarely goes down. It may vary from country to country but it’s still going to be there. Be thoughtful before using your credit card – you need to pay the credit card bill as well.

Mistake #2: Buying more home than you can afford

Buying a house involves a series of decisions that can have an impact on your life for years to come. With the real estate market in the state it is today, many people are regretting their housing decisions. They get attracted to the builder or the property owner or what their friend circle or relatives are going for or the banks loan offer but have not planned enough on paying off their loan.

They forget about the interest rates, payment plan, education loan for their children that they might be having or would have to go for in future. A car loan that they already might be having and the list goes on. They stretch and purchase as much as they can afford. Then, when the rates go up and their rates get adjusted, they can’t afford the payments.  

Make sure that you have planned well for all the components that are going out from your salary or income or business every month. Consult with your bank and understand what Fixed and Variable Interest Rates are. This will help you in planning and budgeting for their payments.

Beware of little expenses; a small leak will sink a great ship. – Benjamin Franklin

Mistake #3: Not controlling your money

Too many people live paycheck to paycheck. They have no savings. They have no retirement plan. They have nothing to back them up in the case of an emergency. They have no control over their money.

You have to take control of your finances if you want to retire someday. You have to learn how to budget, save, invest and spend. All it takes is a little time. And once you get in the habit, you will notice that your life has more control. You should be able to direct where your money goes, not lenders or creditors or anyone else.

Money is a powerful force. don’t use it against you. If your self-discipline and financial intelligence are low, money will run over you. It will be smarter than you to take over your life. – Robert Kiyosaki

Mistake #4: Not saving for retirement

This may sound crazy but it’s important. You can’t rely on the government or your family to help you after your retirement. Just look at this, with the improved health care system and the immense work or business opportunities available today – there are more seniors in the work place now than there were twenty years ago. And even more than there were fifty years ago. If you want to retire with enough money to live comfortably, you have to start saving and keeping aside some percentage of your income for the future.

There are many options available now that you can go for. You can start with a pension fund or fund/contribution that is available in your country as per government rules. Figure out how much you need to invest in order to get a pension that you would like to have after your retirement and find a way to do it. This is your future. You don’t want to reach sixty and realize that you can’t afford to stop working.

What if you become ill and have to retire? What if you have to face an emergency? You can’t always rely on help from others. Start preparing for your future well in advance.

There can be many more learnings but it’s never too late to start working on your finances. Imagine how your life would be with improved financial resources. Start from wherever you are. You can read books on finance, consult a financial specialist to help you plan things for you, check modes of having a second income, work on the list of things that are mandatory, strike off the expenses that are not required for some time like unnecessary shopping or ordering food etc.  

The power is within you!

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