Money is quit bigger than what you may know about it. Mastering the way money functions can take some efforts. You need to understand how to make money, how to manage it, as well as how to use money, to make more money, before you think of spending it.
Listed below are some money mistakes that you may be making, and how to avoid them:
- Keeping all your money in the bank.
We all believe that bank is one of the most safe places to keep your money. But, is it safe to keep all your money in the bank? Let’s assume that you decide to keep all the money that you have right now in the bank, and you want it to be there for the next two years.
Believe me you will not get the same value of your money by the end of the two years. The value of money keeps dropping downwards day in day out.
There are many options out there other than just keeping your money in the bank for the sake of having it safe. One of the easiest options is opening a fixed deposit savings account in a bank with a high interest so that you can make more money using your money.
You may also decide to invest in stocks or bonds which will make your money multiply even more.
2. Not having a monthly budget.
Spending without following any budget plan is a very common money mistake that most of us make every now and then. Once you start spending without following your monthly budget, you may end up with either no money left with you, or accumulated debts.
This is likely to happen reason being you do not have any spending plan. You thus end up buying anything pleasant in your sight, even when it is unpleasant to your wallet.
Having a monthly budget, though ignored by many, can save you a lot of trouble. You learn to purchase the most important things first. For example, if you budgeted to buy a house or car next month, you try hard to secure money for that first before anything else.
A monthly budget also puts you in control of your finances and teaches you to live with in your means.
TIP: Uncontrolled spending can develop into a very dangerous habit that may drag you into deep debts. Learn how to manage your spending habits to save your financial future.
3. Not having an emergency fund.
How do you react to a financial emergency? Do you run up and down to friends, relatives, the rich, and government officials asking for help? And if so, do they easily give you the money? Running up and down asking for money from everyone can be very sucking, this should be the last thing for anyone to do.
Emergency funds should be something you can not live without. This is because the life we live today is actually full of very many emergencies. There are many thugs all over, pandemics, getting fired, wars, accidents and several killer diseases that can strike anytime when you’re not expecting anything weird. Learn to put aside some funds for emergencies or grab an insurance policy.
4. Buying a house or car on your pay cheque.
Am not saying you don’t have to own a house or buy a car. It is actually good to own these two items, but only when you don’t use your initial pay cheque as it is the case with many fresh salary earners. Purchasing a house or car using your initial pay cheque will only add more weight to it.
A new house comes with monthly expenses such as; electricity bills, water bills, security bills, repair and maintenance,and so forth. A car on the other hand requires regular servicing, fueling, repair, as well as taxes. These expenses will eventually over weigh your pay cheque, leaving you in deep debts.
TIP: Invest your initial pay cheques in either high converting bonds or stocks.Use the profit made from the investment to purchase a house or car.
5. Spending before saving.
Many people who do not understand the way money works tend to make this mistake. They have confusion on what comes first: whether to spend before saving, or spend after saving. For some people, it’s already programmed that once they get a pay cheque, what comes next is spending.
Saving a certain amount of your pay cheque before starting to spend puts you in control of your finances. This means you get to live in your means. You therefore get to cut back on impulse buying. Further more, your savings can be used to invest and accumulate more wealth.
Do not save what is left after spending; instead spend what is left after savingWarren Buffett
6. Living on borrowed money.
This means living and depending on money let out to you by other people. Most times, we think that because we want something that is not in our means, we should go to borrow extra money to buy it.
This may seem good in the short run, since you actually get to purchase whatever you want. But, what happens in the long run?It becomes very hard to pay back the borrowed money. Naturally, everyone has greed within him or her. It’s that greed that drives one to want to buy that luxurious car or house.
Again, am not saying that greed is bad, you should just learn to use it to your advantage, not against yourself. For example, if you have greed for a nice car, then work hard, create more income streams and later on, purchase the car.
7. Not planning planning your retirement early.
Blessed are those who had jobs in the previous centuries. Retirement benefits were provided by the companies to their workers, and there was high job security as compared to the current situation. Despite the many labor laws in place, many workers get fired each day world wide.
Have you ever thought about what your life would look like if you woke up one morning, and you o longer had your current one and only job!. Is there enough money money available for paying all bills and other daily financial requirements as well as funding travels and holidays? A study carried out shows that the biggest percentage of people who lose their jobs become completely broke.
TIP: planning your retirement early can help to save you the hardships of struggling to survive at your old age.
8. Not seeking professional advice before getting a bank loan.
It’s ok, we understand you badly need the loan as soon as possible. Am not saying that most of the banks are frauds, but remember, they are in business to make profits. You can easily find a bank that is willing to give you any amount of loan as soon as you need it, of course it’s their duty. But, how about payment of the loan.
I know of a friend who tried to switch banks because the new bank was willing to clear his loan with the other bank, and give him more money at the same time. Guess what, their interest rate was a bit low, but spread over 5 years of monthly loan payments.
The total loan payment almost doubled the bank’s loan given to him. You should make sure to do enough research, and seek professional advice before making any decision of which bank to work with.
9. Not building a passive income source.
Not having a passive income source where you get to build the revenue stream once, and money keeps coming to your bank account with little or no additional efforts, is probably another money mistake you are making right now.
Passive income streams are becoming very popular and most people are turning to them as full time jobs. Many are making thousands and millions of passive dollars, and you too can!.
There are many different ways to make passive income online and for most of these, you don’t need to be a professional to start earning money. Having a passive source of income can be very helpful in many ways.
For example, you don’t suffer a big blow if fired from your job. It also brings in extra cash for spending on luxuries like holidays and travels, dream car, and so forth.
10. Not investing
Investing is the act of commiting your resources or capital to an endeavor while expecting to make profits from the investment.
Many people still think they will wake up one morning when they are very rich. That’s what is in their minds and if they have ever thought of investing, then stopped at thinking. They have never put aside any little savings for the purpose of investment, sometime to come.
Investments such as mutual funds, bonds, stocks, real estate, and many other investments of the kind can earn you a lot of money while you a sleeping. You may decide getting expert advice before you start investing in these passive income streams, so that you don’t end up losing your money.
11. Not having financial plans.
Failing to plan is planning to fail.Benjamin Franklin
Once you fail to set any financial goals, you will never attain the financial success you want. This is because you don’t have any reason to save for, or invest. You are thus not motivated to work hard.
Financial plans help you to achieve your short term and long term goals. Whenever you get your pay cheque, what comes to your mind before anything else is your set goals. You will therefore be able to work towards achieving them first before any other thing.