Are you happy with your money right now? Have you made mistakes with your money? How do you handle your money? The way you handle money tells of your money philosophy. Everyone wants to make more money and be wealthy but the truth is, we have all made mistakes with money that have cost us more money. Here is a list of the five most common money mistakes that people make.
Mistake No 1: Misunderstanding Money Basics
Even though money is such an important aspect of life and success, the majority of people have a limited knowledge of personal finance. If one does not understand how key concepts such as debt, saving, investing, and interest work, it becomes difficult for you to make smart money management decisions.
Mistake No 2: Skipping A Budget
I have found that very few people have actual monthly budgets that they stick to. According to a 2016 study by U.S. Bank, only 41 per cent of Americans use a budget. “It feels restrictive to use a budget,” Swartz says. Young adults on their own for the first time may bristle at the idea of limited spending. To combat this inclination, Swartz says people should shift their perception of a budget. “The way I think about a budget is tracking where money is going, so I can make better decisions,” he says. That means that, rather than limiting spending, your budget becomes a way to ensure money is spent on the priorities that matter most.
Mistake No. 3: Not Saving for Retirement
Even when one has a budget, they may not be putting enough money aside for retirement. This is especially true for those who believe in the “Live Once Mantra” or for those who want to create memories and hence would rather spend now than save for the future. Another reason as to why some people do not save for retirement is they get caught up in the need to deal with immediate expenses, such as paying monthly bills, saving for a home, paying for their education, or investing in business ventures. It can therefore be hard to prioritize saving for retirement, which is decades away.
While there is nothing wrong with living in the moment, life changes, and one must plan for when change happens because it sometimes comes with the loss of income or increased financial demands from family. Financial experts advise that one should at least spare 20% of their monthly income into a savings account designed for retirement.
“Money is hard to earn and easy to lose. Guard yours with care.” Brian Tracy
Mistake No. 4: Making Tax Mistakes
Tax-related mistakes are committed particularly by people in business. Many of us are not conversant with taxes and tax regulations, and it is easy to make mistakes of omission or commission while filing returns. Since no one wants to get an email from the Revenue Authority) regarding unpaid taxes or penalties, you need to either learn how to effectively manage personal and business taxes or get a tax expert to help with this.
Mistake 5: Inconsistency
The internet is a useful resource, but it can also be overwhelming if one has not decided what they want. Consequently, some people end up interchanging their money habits depending on what money application they are using. That inconsistency can be detrimental to your long-term plan of money management and wealth creation.
- Which of the five mistakes have you been making?
- What has been the reason for your mistake?