We all make money mistakes, yet some are more damaging than others! The best thing to do is learn from the common money mistakes that other people make, rather than making them yourself. With that in mind, let’s take a look at some of the biggest money mistakes people make, and consequently, the money mistakes to avoid.
1. Not Having an Emergency Fund
The first mistake that a lot of people make is not having an emergency fund. Not only do you need to build an emergency fund, but you need to get started on this as soon as possible. The longer you wait to build up an emergency fund, the longer it will take, right?
So, how much should you save? Most experts recommend saving at least six months of equitable yearly income.
2. Fail to Plan, Plan to Fail!
This is definitely one of the biggest money mistakes to avoid in your 20s. We see younger people make this error a lot. It can be difficult to think about the future when you have bills and other pressing monetary concerns today. However, thinking about the future now will definitely pay off in the end.
This means considering the likes of putting money away for a pension and life insurance. You may think it is unnecessary to do this while you are young, but there are a lot of benefits you will gain.
First and foremost, life insurance is going to be a lot cheaper the younger and healthier you are. You can look for the likes of 40 year term life insurance policies from insurance companies that offer rebates.
Secondly, when it comes to saving for a pension, the sooner you do this, the more time you have for your investments to mature and for compound interest to work its magic. Plus, you won’t need to put away as much money each month, and so it becomes a lot easier to manage.
You also need to plan for the future in terms of thinking about the sort of life you want to have and setting yourself goals to get there. If you want a different lifestyle compared to the one you lead now, you need to put together a financial plan that enables you to achieve this.
As the saying goes, if you fail to plan, you will plan to fail!
2. Fail to Plan, Plan to Fail!
When you use your credit card to cover shortfalls in your spending, huge amounts of debt can run up in a very short period of time.
Plus, there have been a number of different studies that have shown people tend to spend more money when they are using their credit cards.
One of the reasons why this is the case is because it is easy to stop paying close attention to your budget when you are falling back on your credit card all of the time.
People can view their credit as an additional source of money, but it is important to realize that it is not your money and you are going to be charged every time you use it. It’s time for us to change our attitudes and stop thinking that being in debt is normal. Once you are debt-free, you will feel like a new person!
4. Not Investing Any of the Money You Make
If you do not make sure that your funds are working for you through income-producing investments, you are never going to be able to stop working.
Making contributions to a designated retirement account on a monthly basis is vital to ensure you are comfortable in your later years. You should take advantage of your employer-sponsored plan and/or your tax-deferred retirement accounts.
There are a number of other investment opportunities you can add to your portfolio, and hiring a qualified financial advisor is a wise step to ensure that your money is working for you.
A financial expert will enable you to get a better understanding of how your attitude to risk matches the investment options out there.
The sooner you do this, the better! After all, investments take time to grow. They won’t grow overnight. Patience is key. After all, there is no get-rich-quick scheme. If there were, we would all be following them, right?