The art is not in making money, but in keeping it. When it comes to money, mistakes are made every day. Money mistakes turn into bad habits and bad habits eventually turn into a disaster.
In order to stray away from making money mistakes, you must be willing to accept your mistakes and the mistakes of others and learn from them. Here are the top 5 money mistakes.
ONE: Emotional Spending
When we are struck with a situation that stirs our emotions, emotional spending becomes something many people are guilty of. Ever decided to shop because you were unhappy, or very happy? Emotional spending is real and can leave you in bad financial shape.
Emotional spending can temporarily give you a boost in self-esteem. It can also turn a bad mood into a good mood, relieve stress or diffuse anger. For some people, it eases boredom and cures the blues. But you must ask yourself if it is worth it. This kind of temporary solution tends to lead to a dependency on emotional spending. The consequences of these impulses can take a financial toll on your bank account if you’re not careful.
TWO: Not Having A Budget
Not having a budget is like not having a map or plan to your life. How will you ever know if you are truly living within your means if you do not have a budget? Without a budget, you will never be able to dissect and pinpoint where your money is leaking.
Planning out a budget is not a difficult thing to do. Simply put, having no budget, equals large consequences. Good intentions are not good enough. If information is truly power, wouldn’t you like to have power over your money by being informed where it is going and if you are living within your means? People who file for bankruptcy learn a lesson and have to start from scratch; this time around they use a budget.
THREE: Incurring Too Much Debt
If you’re spending all your money paying interest on credit cards and installment debt, you won’t have enough left for savings. When you buy on credit and don’t pay the balance off at the end of the month, you end up paying much more for your purchases.
A $1200 big-screen TV can end up costing you $2500, but you’ll never know it because the true cost is hidden in your credit card payments. Pay cash and stay away from credit card debt if you want to accumulate wealth. Carrying debt is like sitting beneath your own sword of Damocles – it hangs by a hair, ready to fall at any moment. When you’re burdened by debt, a single disaster can be enough to bury you. Don’t tempt fate. Eliminate debt as soon as possible.
FOUR: Being Out of Touch
Letting your partner have total control of the finances can wreak havoc. If you don’t know how much money you have, where key financial documents are stored or how to pay bills or taxes, you could be in for a rude surprise should you ever need to handle the finances on your own.
Take part in your finances. Learn how to manage bills and don’t shy away from financial duties. Keep track of how much you’re earning, what your goals are, where your money’s going, how much you’re saving and any problems that may be rearing their heads. Losing touch of your financial situation is very risky and bound to problems down the road.
FIVE: Lack of Goals
Building wealth isn’t about how much money you earn each year, it’s about how much money you don’t spend. When you’re just starting out, it’s difficult to find money to save. But even a little is better than nothing.
Create a goal of saving a percentage of each paycheque for starters. Work to build an emergency fund. Lack of goals creates a “should have, could have, would have” financial situation that may frustrate you. Take baby steps and work toward larger goals. Eventually, goal setting will become more of a habit and less of a burden.