Efficient money management is a key skill. However, not all people execute this task effectively. In fact, many of us frequently make costly but avoidable mistakes such as:
Making Purchases One Cannot Afford
Everyone is guilty of purchasing a small ticket but expensive item from time to time. However, buying major luxuries one cannot yet afford could precipitate serious financial troubles. Financial experts suggest avoiding purchasing significant items such as homes and vehicles until the individuals in question have the assets necessary to pay for these items without incurring too much debt or sacrifice.
Living Off Credit Cards
Many people obtain numerous credit cards and accumulate significant balances on these accounts. Over time, paying down these accrued debts presents greater difficulties and might interfere with a cardholder’s ability to address other pertinent expenses. Financial advisors strongly discourage credit cards use to finance most or all expenses. Such professionals suggest that credit accounts should be used for only a few purposes such as emergency expenditures, obtaining and building credit, accruing reward points and for on occasional splurge.
Failing To Live Below One’s Means
On the contrary, many people experience financial difficulties because they live well above their means. Financial experts strongly advise everyone to live below their means. Attaining this goal means spending money on only pertinent expenses like food and bills. Unnecessary expenditures should be avoided at all costs.
Failing To Save Money
Granted, for individuals living on fixed incomes or a certain degree of expenses, saving money can present a challenge. That said, financial officials stress that saving money as early and often as possible is a crucial step to avoiding economic hardship. Savings need not always be pronounced. However, such action must be taken and performed consistently.
Having Only One Income Stream
Many people believe their professional income is enough to provide financial sustenance. That said, financial professionals opine that individuals should establish some type of second income as soon as the opportunity presents itself. No, this does not necessarily means getting a second job. Economic experts recommend investing money in endeavors like interest bearing accounts, stocks or real estate.
Taking No Action
Financial advisors opine that amongst the worst actions individuals can take is no action. As early as their 20s and at frequent intervals thereafter, individuals should continually assess their financial circumstances and make the appropriate additions or subtractions when necessary.