Home Business and Technology 6 Money Management Mistakes You Should be Aware of

6 Money Management Mistakes You Should be Aware of

Coins

Understanding how to manage their money is one of the most critical issues many people face in their lives. Too many employees do not have an emergency fund. Over 40% of people maintain what they described as an uncomfortable level of debt. Over 30% of people are incapable of spending less than they earn every month.

Saving for retirement is the last thing on people’s minds when they are drowning in debt and struggling to live from paycheck to paycheck. Learning to manage your finances takes a little time and effort, but it doesn’t have to be a chore. 

People derive a sense of pride and achievement from setting and achieving goals, such as getting the best deal possible from their energy supplier.

I am happy with an Inadequate financial education

The root of many people’s money management and personal finance issues is the fact that it is not something that is taught in schools. As people start to consider retirement they become increasingly aware of the importance of optimizing their finances. They simply do not know where to start. According to this resource for finance, knowledge is central to effectively managing your finances. Learning to manage your personal finances is a lifelong pursuit. Starting out you are probably focused on breaking the cycle of living from paycheck to paycheck. As your education progresses, your focus will change to investment opportunities and many more exciting things.

I think living paycheck to paycheck is normal

Financial experts will tell you this is a risky practice for many reasons. Because they are currently forecasting an economic downturn in the upcoming years they are recommending that people have at least 8 to 12 months worth of basic living expenses in the bank. This may seem unachievable right now, but every journey starts with a small step. Implementing the recommendations listed above will be an auspicious start. Once you have a moderate amount of money set aside, you might want to think about making that money work for you

I am happy to overpay my taxes.

If you are getting a big tax refund annually, this is a sign that you are paying too much tax to begin with. Many people view this as a way to save money if you are actually able to bank your tax refund, while not being the most efficient way to save is better than nothing. The fact that you are losing the ability to invest these funds yourself and grow your wealth. Instead of providing this money as an interest-free loan to the US government, consult an expert and they will show you how you can pay only the taxes you owe and nothing more.

I don’t have a plan!

 

an Idea

Keeping a rough count in your head of how much you are spending and when the money goes are not an effective method to manage your finances. When you ask people what they spend their money on, they can probably list their major expenses such as mortgage and rent, etc. But a scan through their credit card statement and bank account will reveal a totally different picture. The first time a person takes account of their spending habits is typically an eye-opening experience. If you want to reduce your unplanned spending and increase your savings, start recording all your expenses, you can simply use Excel or one of the many money management websites or apps that are available.

I am too old to change now.

The vast majority of people who live from paycheck to paycheck do not need to do so. Once they begin to understand their spending habits, they can change them. If you earn a minimum wage, how can you possibly justify spending $5 on a coffee on the way to work? Remember that no matter how much you earn, there are thousands of people earning less and still managing to save money. In extreme cases, you will discover people who managed to save as much as 75% of their incomes for a period of time and retired early. Focus on spending what you need and not what you desire.

I am scared to take advantage of my hard work.

While there is some truth to the frequently held belief that borrowing against your home is a terrible idea. This is only the case if you feel you will struggle to make the repayments. Using the equity in your home to pay down crippling credit card debt, resulting in a much more manageable payment plan and lower interest rate, just makes sense. In some cases, your interest rate could even be tax-deductible.

Money management skills are essential as, without them, people usually spend their whole lives struggling with debt and trying to save money. A recent survey by Forbes magazine highlighted the problem. Over 60% of American do not have $500 dollars saved for emergencies. Many of these include people who have worked for a lifetime but never learned to manage their money. You do not have to be one of these people.