Five Common Financial Mistakes
Most people make financial mistakes from time to time. This is particularly true for young adults who are still learning financial discipline. While a cash advance can help a person out of a bind, learning lessons to avoid costly mistakes in the future should be everyone’s goal, especially when targeting debt recovery. As people mature in wisdom and knowledge, fewer mistakes should occur, and knowing how to identify some of the most common mistakes can assist in helping to avoid them.
Not Creating a Budget
Besides planning to pay a few basic bills, a lot of people who struggle with debt do so because they don’t carefully plan their spending. Instead of creating a written itemization of how every dime of their income will be spent or saved, some people simply wing it. While a cash advance can help people out in a bind, everyone should create a personal budget in order to avoid creating debt.
Failing to Pay Yourself First
In crafting a personal budget, a person must remember to pay herself a predetermined amount of money out of each paycheck. To not do so creates a level of frustration of working without reward. It is not surprising that people who neglect paying themselves a percentage of their income end up ditching a personal budget not long after its creation due to a lack of personal satisfaction.
Not Having a Rainy Day Savings
Similar to paying one’s self is having a rainy day savings set aside. People who neglect to designate a percentage of their earnings to a savings account find themselves in a bind when an unforeseen expense or emergency arises. Although a loan till payday is available for these times of need, a rainy day savings account specifically designated for unexpected circumstances adds to a person’s feelings of comfort and security, not to mention such a savings protects people from falling too far into debt when these circumstances occur.
Not Recording Purchases
Most people carry a debit card. For some, this convenience has almost completely replaced the practice of carrying cash. Unfortunately, however, some people end up making major financial mistakes while using debit cards simply because they forget to record small purchases like a cup of coffee or a small item purchased on any given day.
It is not unusual for such purchases to cause a person’s account to be overdrawn and result in costly bank fees. To avoid this, a person can create room for these incidental purchases in a personal budget and either plan to carry cash to pay for them, purchase a gift card that will cover these purchases or just remember to write each one down and carefully balance one’s checkbook accordingly.
Perhaps the largest and the most frequent of all financial mistakes that people make is when individuals rely on credit cards to pay for daily needs. Even worse are individuals who use plastic to pay for items that they don’t need, but that they want anyway. This is also the fastest and easiest way to fall into serious debt, particularly if only the minimum balance is paid on credit card bills each month as interest payments and other fees continue to accrue. Experts agree that credit should only be used when absolutely necessary, as the cost of using plastic is simply too high to use on a daily basis.
While most people make costly financial mistakes once in a while, everyone can avoid making them with careful planning, budgeting, record keeping, and self-discipline. If a mistake is learned from and adds to a person’s financial education, it has value. If it is ignored and repeated, it is a complete loss for the one making the mistake and can seriously compromise one’s financial future.