Money mistakes are more common than you think. You’re not alone if you have had a few financial mishaps over the years. A good percentage of Filipinos cannot stop making cash mistakes because they are either unavoidable due to the lack of income or the wants are prioritized over the needs. Below are some of the most common financial mistakes you might be unaware (or aware) of making and some tips on how you can avoid them.
Here Are the 4 Worst Money Mistakes You Might Be Making
Making smart financial choices is a must for everyone, but especially for the working class. Saving up for retirement is not wasteful or expecting the worst; it is being prepared for what the future may bring in an ever-fluctuating market. Below are some of the financial mishaps you might want to avoid.
Not Saving for an Emergency Fund
Emergency funds are aptly named because you only use them for, you guessed it, emergencies. Given the nature of emergencies, you won’t expect when this will be or if it will ever come to pass. Ideally, your emergency fund should cover three to six months of living expenses so that you won’t be left penniless during unforeseen circumstances such as loss of a job or illnesses. This fund should be your safety net to avoid going 100% bankrupt.
Not Paying for the Important Debt First
Pay up big loans first so they don’t accumulate interest at a higher rate. Student loans, credit card debts, or personal loans should be settled and paid aggressively as soon as financially possible. After paying off the high-interest loans, move on to the lower interest rate loans like car loans and mortgages. Write down your debt payoff plan to keep you on track, including your balances and interest rates.
No Frequent Credit Monitoring or an Alert Service Set-Up
Fraud and identity theft are rampant in the age of the internet and advanced technology. They are two of the more undesirable phenomena in this new age of information. Fortunately, many banks and credit companies now offer credit monitoring services. These services will allow you to monitor and stop any fraudulent activity and alert you of danger. They are often free as well so that’s a bonus.
Presence of ‘Lifestyle Creep’
“Lifestyle creep” refers to the slowly increasing purchase you make as your income increases as well. You think that now that you can afford these things, it is alright to buy them. While there is nothing wrong with pampering yourself once in a while, too much splurging can cause financial mistakes or troubles. Set aside the money you were going to spend on that expensive self-love gift and spend it on something more worthwhile for your financial goals.
These Are the 4 Common Money Mistakes You Should Avoid in Your 30s
When you try to save money in your 30s, these financial decisions can affect your long-term money goals. When you or a loved one gets sick, medical bills can pile up. Credit card debt can accumulate high-interest rates if not paid off as soon as possible.
Quitting from one job and not finding another one soon could mean the difference between having a home and being without. Below are five common money problems to avoid in your 30s.
A lot of people underestimate insurance, whatever type it is, term life or health insurance. This is mostly because they bank on the hope that they will never use it. However, being uninsured can mean the difference between life and death.
One accident can cause you financial hardship that would be hard to get out of without the help of insurance money. Just think of it as another investment strategy and part of your retirement contributions. Pay a bit of money now, collect a lot more later.
Having and Buying Too Many Houses
Your home must be one where you are comfortable and happy. However, realistically speaking, many people cannot afford their dream house without house loans or mortgages. To avoid spending more than you should, separate a budget for repairs, maintenance, and loan payments. Gratifying as owning your own home might be, if a mortgage results in high-interest debt, it might not be worth it in the long run. Opt for a simpler but nevertheless beautiful home.
Not Aggressively Planning and Saving for Retirement
Retirement may seem far away at your age, but every cent you save now will accumulate over the span of many more decades. The compounded interest will be doubled and even tripled by the time you reach your retirement age.
There are government programs for retirement plans but they may not be enough for the kind of retirement lifestyle you envision, a comfortable retirement. Increase the savings in your financial plan if possible and make a separate fund to add to your retirement.
Saving for Your Kids First Before Saving for Yourself
In starting a family and having kids, saving money and financial planning are no-brainers. It is natural that you, as a parent, want to put the welfare of your kids first. However, it might be smarter to put away money for yourself first before aggressively saving for your children’s financial education. There are many ways to pay off their schooling, sans borrowing money, such as scholarships, grants, and loans. Retirement planning can only be done through insurance and saving.
8 Common Money Mistakes to Avoid in Your Teens and Twenties
If there is one thing many financial advisers agree on, it is that it is never too early to start your financial goals. Credit reports can be damaged or boosted as early as your teens and your 20s. An unforeseen financial emergency can also cause long-term financial problems if not addressed as early as possible. Below are common money woes you might want to avoid as early as your teenage years and 20s.
Lack of planning of monthly budget
Living beyond your means is a mistake not only you are likely to do at some point, but everyone else. Shiny new toys might be tempting but if it is beyond your monthly budget, they can make you develop a lifestyle you cannot afford. As part of your due diligence, try to list down all of your expenses as a sort of financial plan and make sure you do not go overboard.
Not earning and saving cash in your free time
Rest is important and you should make sure you have plenty of it in between school and work. If you have more free time than you know what to do with, having extra income via side jobs or passive investments is not a bad idea. Training yourself to make more money when you can is a good way to not just fatten up your bank account but avoid a common money mistake called spending too much.
Having a credit card bill you can’t pay off
Having a credit card is not having “free money.” It can either make you or break you, financially, that is. Do not treat your credit card as a free pass to splurge on whatever you want. Instead, treat it as you would your debit card. What you use your credit on now, you have to pay off later. Again, do not go overboard with spending habits. Only buy what you can afford with the cash you have now.
Not negotiating your salary when starting a job
One of the most usual mistakes even dull adults do is not negotiating their salary when taking on a job. Some find it difficult because they want to please their future employers, others are just too scared to ask.
Remember that you are getting the job because you have the skill set. Your future employer should need you as much as you need them; that is how employment works. Establish a good but firm relationship with your new boss by asking, very politely, if you can have a raise or added benefits for your work rendered.
Lending money to your friends when you can’t even afford it
When your loved ones want to borrow money from you, there is an innate sense of kindness you have where you will lend it to them, despite struggling yourself. A financial pitfall is practically giving away your savings to help out a friend.
While there is nothing wrong with being generous and helpful, you must also think of yourself first. There is also the matter of awkward collection afterward that can even strain your friendship.
Wanting unrealistic financial goals
Dreaming and aiming high are two things you should not be ashamed of. As a young hopeful individual, you have many financial aspirations for the future. Personal finance goals can be something grand like wanting a new car by the next year or something simpler like finally paying off the cash advance you took out from your work last month.
They may be as strict as saving up your first million by the age of 25 or as lax as buying a second-hand car with extra money from your part-time work. However, it is worth considering that these goals may shift over time and not always take a turn for the worse. Stay optimistic, save money, but nonetheless stay realistic.
Forgetting to cancel unused subscriptions
One of the most common money mistakes you might make as early as your teenage years might surprise you. Forgetting to cancel multiple subscriptions to different streaming services might make a sizeable dent in your savings accounts if accumulated. An annual fee may go unnoticed but they are more expensive. Pay close attention to what you subscribe to, keep a list if you must.
There are plenty of financial blunders you can make over the course of your lifetime. The important thing is that you recover, eventually develop a good credit report, avoid consumer debt, and start saving as soon as possible. Money left to grow in insurance is your safety net in case of emergencies. However, do not forget to enjoy the hard-earned money to make yourself happy as well.
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