A lot of people are unfortunately not smart with how they handle their money. Whether it's irrational spending, not saving, or living on borrowed money – these financial pitfalls can have a hugely negative impact on your life. In today's blog, we're going to cover the 3 most common financial mistakes and how to avoid them.
How many times have you bought something for the sole reason of it being on sale? If this is a reoccurring trend, then you very likely have a problem with irrational spending. While in most cases the things these items aren't very expensive, buying a pack of cigarettes and a mocha cappuccino from Starbucks every day will cost you close to 500£ a month. Now multiply that by 12 and you see how much money this is on an annual level.
In terms of avoiding this common financial mistake, next time your eye catches something, think whether you really need the item. If it's an occasional thing, or something that is a necessity for you then go for it. But if you find yourself buying without any actual need for the items, then stop and try and look at the situation from a neutral point of view. If you were giving financial advice to a friend, would you advise him/her to buy or save? Use that same advice and apply it to your own situation.
What is life if not a set of unexpected bills and payments that pop out of nowhere every month? This is why not saving money is a big mistake that a lot of people make. They only calculate their fixed monthly payments such as rent but don't take unexpected payments into account. For example, your car might break down, or something around the house might need fixing. You can't foresee these expenses but that doesn't mean you should ignore them.
On the contrary, you should always have an amount saved up as a rainy day fund. Put aside a part of your paycheck every single month and use it when an unexpected expense comes up. It's better to be prepared and keep your savings budget stable rather than living paycheck to paycheck and struggle by the end of each month.
Living on Borrowed Money
I'd like to add a personal note here that this one irks me the most. People borrow money for totally unnecessary things and then struggle to pay back the loan. It's become an exceptionally big issue nowadays with how accessible credit cards have become. People don't budget properly and don't control themselves when overspending their credit cards which leads to huge interest rates that need to be repaid later on.
My first advice for people who do this is unless you really need one, don't take out a credit card. You can do all card payments with a debit card, and it doesn't allow you to go into a negative balance. Don't forget that having a good credit score can be a huge deal later on in life if you want to take out a mortgage, so keep this in mind next time you're about to overspend. There's an old saying that says "Spend not where you may save, spare not where you must spend."
For more information on Causeway Connect's financial services, check out our website.