5 Biggest Money Mistakes

5 Biggest Money Mistakes: You must have heard people saying that money is not everything, it may be partially correct. But the need for money in an individual’s life can’t be discounted. Any philosophy, mantra or motivation can overwrite money’s importance and need. Money can’t buy happiness or time or memories but can be a great catalyst in making these things happen. Forget about the secondary and tertiary needs, even our primary and basic needs like food, shelter are completely dependent on money. Many may think, what’s the big deal in having these basic amenities. So, just a reminder that still millions are homeless and billions can’t afford a meal. While thousands die from starvation. These numbers are only increasing. Now it’s not just a so-called third world problem anymore. Even countries like The United States and developed nations of Europe are facing the crisis of poverty and hunger.

In recent times the gap between the rich and poor has increased drastically. This is not a good indicator for the economy and working class. The reparations of it may not be visible on the surface level at this point of time but will hit the economy hard and will have a significant negative financial impact on the working class, if not taken care of at this point of time. If you are a part of the working class, middle class or even belong to the upper mid section (financially) you need to be very careful and smart with your money matters. Here are 5 very basic but impactful ways to avoid any money mistake which most people commit.

Buying Expensive and Fancy Goods

The first one is the most silly yet the most common money mistake which most people commit. Over spending money is a very common phenomena. People either overspend or at times spend even more than their income. You need to understand the difference between assets and liability. Buying the latest smartphones, expensive watches, new cars and branded clothes is a dream for many individuals. But more than a dream it’s a trap that gets you into the never ending cycle of overspending and debt. Always have a budget and try not to overspend. Before buying any fancy or expensive item, first see its importance & want in your life then see the product’s value in the long run. Buy the product only if it’s worth it and matches your needs & parameters.

Not Investing Money at an Early Age

Another big mistake that many people make is to not invest money at an early age. Few believe that investment is a late 30’s or mid 40’s thing and 20’s are meant for enjoying & spending money blindly. The other very common point or excuse made by people is that they don’t have enough money or salary which makes it impossible for them to invest. The point made is that they don’t have sufficient money for the basic expenses so how will they invest money. A big misconception in the market is that investment is a big short thing and can only be done with huge sums of money in pocket. But always remember that something is better than nothing, even investing small sums of money will sum up into a decent total after a few years of investment. Never underestimate the power of compounding. The earlier we start the more you save. This money will reduce your dependency on salary or basic income and can even make you financially independent in the long run.

Debt and Debit Card Culture

The EMI and debt culture has taken over the modern world. Earlier debt was taken in the case of cries & emergencies or was used by people & businessmen for investment purposes. So, debt back then was mainly meant for either productive asset generation (Business or investment) or was crisis situations. With the arrival of things like debit cards and the ease in getting loans & EMI’s have transformed debt into a daily routine for the masses. People have got the habit of even buying groceries and little things on debt. This leads to overspending and makes a person’s personal finances miserable. Many studies have shown the negative impact of debt and debit card culture.

Retirement Planning

Living in the present is good but ignoring the future isn’t. Many people ignore their retirement planting’s or don’t give it much importance. Even people who plan their retirement fail to calculate the upcoming financial threats and inflammation. This results in people running short of money in their old age or post their retirement. In recent years there have been many retired people who have run short of money or have even become homeless in countries like the US because of their calculation of retirement funds. In today’s time where things are so overpriced and properties are reaching an unimaginable cost we should plan our retirement very carefully.

Money management and planning   

Many people make a good living with basic salaries or income. While there are a few with better pay cheques who even struggle for their basic needs. The only thing which differentiates the two is the skill of money management and planning. Once you understand about your basic & essential needs which can’t be compromised and the needs which are nothing more than a momentary wish or want you’ll be able to control your expenses. By better management an individual can allocate money for expenditure, savings and investment. When the basics are covered a person can plan and invest money which will decrease his/her reliability on the basic income or salary by the creation of a passive income source.

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