Personal finance is an important aspect of your life. Your personal finance mistakes would be impacting your lifestyle, comfort, and the quality of life in the long run. We must, therefore, avoid some of the most common and frequently made personal finance mistakes that culminate in serious monetary implications and economic hardships.

Personal Finance Mistakes

Experts insist that in the case you seem to be already going through financial issues and crises, if you steer clear of some of these personal finance mistakes, you could still survive the ordeal.

Mistake No. 1: Continuous String of Payments

You need to reconsider your purchase decisions. Question yourself whether you actually require the items that compel you to keep making payments every month and you have been doing that for years now. Things such as music services, cable television, fancy gym memberships, could compel you every month to make substantial payments but you are left with owning nothing in the process. When resources are restricted and you have monetary constraints, you must get into the habit of saving and cutting down on the number of payments every month. Lead a leaner or frugal life and that could boost your savings and cushion you from serious financial ordeals.

Mistake No. 2: Leading a Lavish Life on Loans

Many of you are in the habit of using credit cards for buying day to day essentials. Today, this is quite a common practice but it has serious financial implications. Credit card’s interest rates would be making the ultimate price of the already charged items far more costly. Moreover, when you rely so much on your credit cards, it is quite clear that you would end up spending much more than your income or monthly earnings.

Personal Finance Myths

You come across a lot of advice on personal finance every day on the Internet and on television. It is an overwhelming task to understand and differentiate between what fiction is and what actually the reality is. Here are some misconceptions about personal finance. Let us understand the personal finance myths and of course, the associated reality.

Myth: You Should Attack Your Smaller Debts Initially

As per financial experts, it is a wise move to give top priority to pay down the highest-interest-rate debts first. This ensures that you are paying off a substantial amount or a chunk of the debt, in the form of interests. However, some people get a sense of achievement if they are able to pay off the smaller debts one by one. That gives them a feeling of self-confidence as they pay off the smaller amounts one by one with great ease.

Myth: Purchasing a House is a Better Option than Renting

This is a myth. Most people are of the opinion that home is supposed to be a good investment. But you must appreciate that purchasing a home may not be a smart option for everyone from either the lifestyle point of view or from the financial standpoint.

In case, you are just starting your career, renting should be a much better and practical choice. It allows the desired flexibility. You must appreciate the fact that one has to take decisions as per his or her unique requirements and circumstances. Buying a house could be a feasible option provided you have the capacity to cover the up-front fees and costs, your precise credit score, and the period of time, you wish to live in that house. Mostly, for young persons, renting could be a much better choice.

Myth: No Need to Do Retirement Savings

In fact, you must start saving for retirement at the earliest possible. The earlier you start; you would be able to enjoy more financial security and freedom to spend while you are not working anymore. You need to make your monthly contributions toward your designated retirement accounts and you could do that if you are able to make substantial savings. Moreover, consider multiplying whatever money you have by investing wisely. Make the most of the employer-sponsored plan or the tax-deferred retirement accounts.

Myth: Invest Only If You Are Rich

There is a misconception that only the affluent class must consider investing. Investments are not meant for the common public who are compelled to reside in studio apartments and avail public transit. Investments are for everybody and it surely is the most effective way of growing your wealth. If you fail to get your cash work for you in the markets through certain income-generating investments, you would never get the liberty to stop working ever.

Personal Finance Tips

Examine Your Assets & Evaluate Your Net Worth

It is best to be aware of your bottom line. You need to accumulate all your financial statements such as bills, bank accounts, mortgage statements, credit cards, and even the pay snubs.  You must consider incorporating the latest value of the car, jewelry, art, or even the house. The effective financial software would be subtracting your liabilities straight from your assets for determining your net worth accurately.

Chalk Out a Proper Household Budget

You must remember to manage your finances well in the first place. One proactive step toward that is chalking out an effective budget for the month. Create a spending strategy or plan and abide by it to the extent possible. This is the best way of fulfilling your financial aspirations and dreams. Ensure that the budget is realistic, flexible, and suitable for your unique requirements.

Conclusion

We have briefly discussed personal finance mistakes and myths. You need to stay away from the hazards of overspending. You must monitor all your expenses including the tiny expenses that add up too quickly. You could then take note of the relatively bigger expenses. You must focus on saving something from your monthly earnings every month. It should be your priority every month to do some savings. Think twice before incorporating brand new debts to your monthly payment list. This truly compact personal financial guide is supposed to be the ultimate source of information and effective way for preparing you financially.

Published by Karen Anthony