6 mistakes in dealing with money, which urgently need to get rid of

2024 Author: Malcolm Clapton | [email protected]. Last modified: 2023-12-17 03:44

Ending misbehavior in monetary matters is not easy, because most often the reason is education or lack of knowledge in the field of personal finance. Even if you have the noblest intentions and a sound financial plan, this behavior will not allow you to be successful in financial matters.

For example, if you want to get out of debt, but at the same time constantly spend money on trips to expensive places to keep up with friends, you are unlikely to achieve your goal. Therefore, let's talk about what mistakes people most often make when managing their finances and, of course, how to avoid them.

1. Emotional spending

Shopping for some people is a tool to help them cope with the ups and downs in life. But emotional, impulsive spending doesn't really help much. Rather, on the contrary, they complicate the situation. The temporary uplift that is felt immediately after the purchase inevitably fades away, leaving you with an empty card and a pile of unnecessary things.

To avoid impulse buying, set a few simple rules for yourself. For example, buy things solely from the list you made while in a relatively calm state, and not when you are worried or upset about something. Or force yourself to wait 24 hours before making an unplanned purchase.

Another good idea: unsubscribe from all store mailings by email to reduce the temptation, and go to your favorite stores with only cash on hand. If necessary, contact a loved one with whom you can discuss your intentions and who, if something happens, will become the voice of reason for you.

2. Lend money

To lend a helping hand and lend a certain amount to relatives or friends is, of course, wonderful. But by doing so, you are damaging both your budget and your relationships with loved ones. Over time, you can be left without money and without friends.

You can help a friend in need and maintain a warm relationship with him in other ways, not only by lending to him.

Look for ways to solve your friend's problems without throwing money at him. For example, ask your friend to give her a ride to work until she gets her car repaired.

But if you still want to offer money, then take it as a gift. Then you will not feel offended if you notice that your friend is buying himself new clothes and is in no hurry to pay you back. If you can't afford such a gift, just don't lend.

3. Constantly pay the invoice

There are people who take pride when they pay for a friend's lunch or treat the whole party with drinks. But if you've gotten into debt (or borrowed money from the part of your budget that you set aside for more important spending) in order to consistently pay for everyone, it's worth starting to worry.

People who pay for everyone on a regular basis often find that their friends or family get used to this treatment and expect it.

As soon as you stop doing this, the relationship becomes strained. In addition, it becomes difficult to know if these people are going to lunch with you because they enjoy spending time with you, or because predictably there will be free food. Need proof? Ask anyone who won the lottery how many old friends they have left one year after they won.

4. Compare your financial situation with the income of others

Many people measure success by the size of the house or the make of the car, but this is an inherently flawed approach. Big houses and expensive things only show how people prefer to spend their money, not how much money they actually have.

If your neighbor can afford an SUV, why are you worse? But keep in mind that most people you know live beyond their means.

Remember that, in addition to beautiful things, your friend may have a debt equal to or greater than their value.

To avoid living beyond your means, determine what is most important to you - and only to you. Set goals for yourself and think about how you want to see your life in 5, 10, 20, 50 years. Maybe you want a big house in a certain place or retire with substantial savings. Once you've identified what matters to you, make spending decisions based on your goals. Spending money to outmaneuver someone but not making your true desires come true is stupid.

5. Live paycheck to paycheck

Every month you have to pay bills and buy basic necessities, but you control the rest of the income at your own discretion. It may be that you spend your entire salary without saving savings and investing in your future. This means that you will not have funds for a rainy day, in case of emergencies, and at the end of your career you will not expect a quiet retirement.

When people spend everything they earn, they simply have no financial strategy at all. And this is the biggest mistake people make.

How to avoid it? Each month, you need to plan a budget that includes contingencies for emergencies and retirement savings. A good rule of thumb is that your rainy day fund should be equal to your living expenses for 6 months in economy mode, and your retirement contribution should be 10% of your income. And sticking to such a budget is only possible if you have a plan for spending and saving.

6. Ignore reality

If you avoid checking your credit card and bank accounts, you can be said to be living in a monetary coma. You might think that if you pretend that the problems do not exist, they will disappear by themselves. No, they will not disappear.

Refusing to handle your finances is like refusing to go to the doctor when you realize that something is wrong with you.

The only way to avoid this mistake is to carefully study the problem and make a plan to solve it. Now is the time to be prudent and not react to events that have already taken place. Get help from a friend, family member, financier acquaintance, or consultant to objectively assess your financial situation and develop a plan to improve it. Before getting started, study your credit history, your debts and monthly obligations. This is enough to start a conversation. Only when you face the truth can you take back control of your money.