Ideally, you need to achieve financial security by the age of 30. True, it’s easier said than done. But you must do it nonetheless. That is if you do not want to go through midlife trying to keep up with lost time. Sure, you could cite a variety of reasons why you’re holding back saving and investing. But none of those reasons matter in the long run.
What matters is you commit to achieving financial security. And you see this commitment through. That is despite roadblocks and challenges. And that is by steering clear of the following money mistakes people normally make.
Failure to budget
Budgeting allows you to spend only what you have. Failure to budget is the common reason why people’s finances are all over the place. When it comes to budgeting, you should not limit your itemized expenses with fixed monthly bills.
Factor into your budget one-time expenses too. For example, out-of-pocket medical payments, car repair, insurance premiums, and the likes. You normally pay for these expenses once a year. But they should be accounted for in your monthly budget.
It usually happens. You receive a bonus or lump-sum benefit from work, and your first instinct is to spend like royalty. Sure, we recognize your hard work, and we know you need to spoil yourself from time to time as a reward. Still, you need to ask yourself. Is it worth it?
Would you rather have the latest iPhone to show off to your colleagues, or the most expensive meal in the city to impress your college friends, or the swaggiest pair of shoes from Kanye West instead of ensuring that your retirement years will be comfy and stress-free? Your choice should be obvious.
You excuse yourself by saying you only drink or party once a week. But the money you spend on those drinks does add up. Plus, if you drive after partying and get apprehended, you’ll need to hire a DUI lawyer to settle your case. And then your partner gets really frustrated that they file for legal separation, and so you have to get another lawyer for that. It’s a downward spiral. Your finances will suffer.
The moral of the story? Don’t drink. Or drink moderately, as those commercials would say.
You pass by a shop, and in the display window, you see a nice bag. You don’t need a new bag, but it’s too nice you find yourself taking it straight to the cashier. You go home and realize you’ll need to skip lunch for a month if you want to stay within your budget.
Impulse purchases are things you can control. So get a hold of yourself. Do not let your mind trick you that a bag will make all of your problems go away. It won’t. In fact, it can worsen them.
The first step to financial literacy is to keep track of what you’re spending. And by keeping track, we don’t mean “mental accounting.” Make it a habit to jot down your expenses in a notebook. You want to be accurate.
Another crucial step to financial literary is to begin to save. Today is the best day to start. Stop delaying. Once you have enough money saved, start looking into investment opportunities.
Limited financial portfolio
Speaking of investment, your goal should be a diverse financial portfolio. You do not want to put all your eggs in one basket or all your precious baskets in one storage. If that storage burns, you lose everything. So spread out your capital over a variety of assets. Think real estate, cryptocurrency, forex, and bank products.
Your financial security should be on top of your priorities. Knowing that your finances are in order will give you peace of mind. With peace of mind, you’ll be less likely to bear the brunt of too much stress. That would be beneficial to your physical health. Moreover, when money matters are taken care of, you’ll have better relationships with the people in your life. You won’t act like the Grinch, angry and angsty and avoided by everyone.
One of the major roadblocks to financial security is procrastination. It’s the seven-headed monster you need to slay. While that will be no less than a challenge, it is doable. You just need to have a clear-cut financial plan. And it should be one you believe in with all your heart. Every time you waver, imagine your retirement years. That should give you a kick in the rear.