Even when you are trying to get on top of your personal finances, there are some common mistakes that we tend to make or fall into, despite our best efforts and the best intentions.
To help you avoid the most common mistakes there are when it comes to managing your personal finances, we have put together a list of what these mistakes are and how to make sure you do the exact opposite. With our help, you will be on your way to saving in no time.
1. Excessive Spending
This one might sound obvious, but spending too much money is one of the most common mistakes that people can make when they are trying to manage their financial situation.
Although you can’t avoid your usual expenses like rent, bills, and food, you will need to learn how to control your impulse purchases so that you can live within your available means.
To help you stay on top of your spending, we would recommend that you create a budget that factors in your income and any monthly expenses you have. Then, just stick to it!
2. Not Paying Off Your Debts
The second biggest but also quite common mistake that is made in terms of personal finances is allowing your debt to build up over time without paying it off. Sometimes it can be difficult to pay back loans due to high interest rates, so a personal loan may be a good idea.
This essentially allows you to clear your high-interest debt by taking out and paying it off with a personal loan, as these will often have much lower interest rates. You can find out more about how to apply for a personal loan with reasonable rates at https://www.creditninja.com.
3. Living Paycheck to Paycheck
Living without a safety net or a stash of money that you have been saving for a rainy day means that you will be at the mercy of the universe to keep any unexpected expenses from cropping up. Otherwise, you could end up in a bit of a sticky financial situation.
Again, it is not always easy to save if you are already trying to get on top of your finances, but even putting just a few dollars aside each month will eventually start to add up.
We would recommend setting up a separate account for your savings which you can pay into each month, either by a recurring direct debit or on a more ad hoc basis.
4. Not Keeping Track of Your Spending
How will you know if you are sticking to your allocated budget or not if you are not keeping track of or monitoring your spending? This is yet another common money managing mistake.
This will also make it easy to miss fraudulent transactions, or what is more likely, that you will be able to spot recurring payments that are going out for subscriptions you no longer need.
Similarly, keep an eye out for any changes in your credit score. As you start to pay off your debt and manage your finances better, you should notice that it improves over time.
5. Poor Investments
Some people avoid investing their money altogether, which we would also consider to be a bit of a mistake when it comes to managing your personal finances, especially if your end goal is to try and amass some long-term savings or wealth. Then, investing is essential.
What’s worse than not investing at all, however, is when people make rash or reckless decisions regarding how to invest their money and end up making poor investments.
If you are thinking about putting the money you have saved up until this point into savings, we would recommend doing thorough research on the market and recent tradings. This will help you to avoid making poor investment decisions and therefore avoid losing your money.
Final Thoughts
Although it seems like there are a lot of “dos” and “don’ts” in regards to the best ways to manage your personal finances and your current situation, most of it is common sense.
As a general rule, try to cut back on any unnecessary spending until you are starting to save up an emergency fund. Swap takeaways for home-cooked meals and skip your daily latte with an extra shot and syrup. Don’t even look at the avocado on toast on your local brunch menu ever again. Just kidding on that last one, but do cut back where you can.