Generally, most mistakes are forgivable. Very few mistakes can singlehandedly ruin your life but when it comes to financial mistakes, the compounding natural of money makes it very hard to climb out of the pits you fall into. As such, I would rather you not fall into them in the first place. Here are 3 pits you need to avoid at all cost.
1) Overspending Your Budget
Here’s a classic financial mistake 90% of people make in their lives. Most people do not even have a budget to begin with. No wonder they are overspending!
I would say this is the number one area where common sense usually fails to prevail. If you spend more than you earn, you WILL be broke.
If you are not getting any richer even though you have been working for quite some time already, it would be good for you to review and keep track of your spending habits.
The habit may take some time to pick up, but it is the surest habit that will get you started on your road to wealth.
2) Postponing Your Credit Cards Payments
Would you take a loan with an interest rate of 24% per annum? No, I’m not talking about borrowing from illegal money lenders…
Why bother when you already have a loan shark in your very own pockets? At 24% interest rate, your debts would double every 3 years! This is why I always encourage my readers to always pay their credit card bills promptly, if not immediately.
It would be safe to steer away from credit loaning facilities (e.g. credit cards) unless you already have a strict habit of keeping to your budget (Back to point one).
Credit cards are sharp double edged swords that can grant you huge discounts and savings if you use them wisely. However, if you wield a credit card recklessly, you would do nothing but to land financial cuts on yourself.
My advice for you is to use it like a debt card and track of your spending like a hawk.
3) Not Investing At All
It’s surprising that there are some people out there that still think they can get away in life without learning how to invest.
Given the ridiculous price hikes over the last decade, it is almost impossible to improve your standard of living without picking up investments.
Your salary increments have not been keeping up with the rate of inflation and our bank interest rates are close to zero. Your best bet at exiting this rat race is to pick up the personal investing.
To be frank, we are all investing. The only difference is whether if we are doing it consciously or unconsciously.
When you put your money in the bank to collect that tiny bit of interest, they are investing it on your behalf.
When you pay your endowment premiums to your insurer, they are also investing it. Whether you pay $36,000 for your degree or place that down payment for your HDB flat, you are also investing.
Since you are already investing, you might as well make it a point to learn how to invest wisely or find a mentor (aka investment tuition teacher) that will teach you how to maximize your returns.
Image Credits: investopedia.com