Do you often find yourself scraping your wallet for cash or cards that have a sufficient balance? Well, most of us have been there. Whether you’re a teenager trying to survive within your allowance or an adult figuring out how to manage your income, money matters can be a little tricky.
However, it’s never too late to start saving up. All you have to do is identify the leaks in your cash flow. To help you with that, we’ve made a list of common mistakes people make when managing, or not managing, their finances.
1. Unnecessary spending
Unnecessary expenses often stem from impulsive spending behavior. More often than not, a huge chunk of living expenses goes into food and drinks. It’s not as if we can avoid it but what we can do is contain it. For instance, do you really need to go to the overpriced coffee shop when you have your very own coffee machine lying at home? Plus, it could be fun being your own barista.
They say you can’t take your money with you and that’s absolutely true. But that’s also no reason to burn a hole in your pocket. For starters, you could prioritize your expenses by making a strict budget for some areas and a looser budget for others. There’s a fine line between treating yourself and making up an excuse to purchase something you don’t actually need. The key is to find moderation when it comes to spending.
2. A cycle of recurring payments
Bank balance isn’t looking so good? Maybe it’s time to whip out your Xiaomi phone and spend some time on the calculator app. Having a budget should be a no-brainer. But it’s also essential to do some upkeeping, review your budget, and make alterations if necessary. You might discover that membership in the gym you never go to may not be so necessary after all.
A good way to start making changes to your budget is to work on your entertainment allocation since this is something that can be considered as a want instead of a need. You can begin by reevaluating the entertainment plans you subscribe to; maybe the 2-device plan is a financially better fit for your needs compared to the 4-device plan. And if you’re in a pinch for money, maybe it’s okay to sit through the YouTube ads for that month.
3. Late payments
Overdue payments are never fun for both parties involved. It is best to pay off that bit of cash you owe your friend for lunch and your monthly utility bills. Practicing prompt payments not only creates a responsible narrative on your part but also makes it easier to keep track of your monthly financial commitments compared to an overlap of bills across a few months.
Additionally, this prevents payments from accumulating over the next few months. Simply put, it’s easier to conquer a hill than a mountain. You definitely do not want to deal with the snowballing amount of debt. The endlessly increasing outflow of cash is stressful but, most of all, demotivating.
4. No emergency fund allocation
Source: Pexels.com – @Joslyn Pickens
Sometimes, it’s not about your spending habits but just unavoidable circumstances. For example, it could be fixing a dent from a minor car accident or a high-cost hospital bill from an abrupt need for surgery. Sums like these can really throw off your balance sheet.
That’s why it’s good to always be prepared. You can never lose out by saving up for a rainy day. The general guideline is you’re advised to have 3 months’ worth of expenses saved up for emergency purposes.
5. Not prioritizing retirement funds
Although we all wish for it, unfortunately, we do not live on a blank cheque. This brings up the question of what happens after retirement? This is exactly why living paycheck to paycheck is only a short-term solution. On the other hand, retirement saving is the right way to go.
Having a retirement financial plan to fall back on will have an immense impact on the future of your retiree lifestyle and general life satisfaction. For starters, the government-based Employees Provident Funds are extremely beneficial. It would help to plan well and spread out the usage of your hard-earned money rather than blowing it all into one major expenditure.
We no longer live in times where we work for our money; we now make our money work for us. So, the prevalence of meeting young people investing to work towards early retirement is unimaginable, with good reason. To learn more about it, you can do online research about investment opportunities available to you. But if you prefer a more reliable and personalized option to go about this, you can consult a financial advisor instead.
It is common to make errors of judgment as you figure out a way to manage your money. The key is to plan out your financial decisions and how they can contribute to your future. Retail therapy might be tempting. But even if you do have money burn, being more mindful about your expenditure can go a long way.
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