Many people are steeped in debt, and a major reason for this is that they have cultivated bad financial habits.

While money management doesn’t come easy to everyone, future problems such as high debt risk and lack of savings can be avoided if one starts learning the ins and outs of personal finance at a young age.

To help you out, here are some common money mistakes people make, according to various stages of your life.

• In your 20s

Many people transition into the workforce in their early 20s, arguably making this the most important phase when it comes to managing finances. Pitfalls to avoid include:

1. Spending indiscriminately

It is undoubtedly rewarding to reap the fruits of your labour, especially if it’s your first paycheck. You might have a list of luxury items you’d like to cross off – sophisticated gadgets, designer clothes, overseas travel, even your first car.

Without proper planning, however, exorbitant spending could cause you to be burdened with a high monthly commitment. Make sure that the fulfilment of your wants and desires does not exceed your earnings!

2. Forgoing emergency money

Many young people who have just started working do not cultivate the habit of saving. Dismissing its importance, they instead tend to spend lavishly on the grounds that “now” is the time to enjoy life.

While there’s nothing wrong with treating yourself, it’s prudent to set aside at least 10% of your salary each month. This would be particularly helpful in an emergency or urgent situation, such as the unexpected cost of medical treatment.

3. Misusing credit cards

Credit cards, in and of themselves, aren’t evil – they are a financial tool that can be helpful in contingencies or for the purchase of big-ticket items.

But owning one could also lead to financial mismanagement, especially if you use that plastic indiscriminately and spend beyond your means.

Uncontrolled purchases can leave you entangled in debt coupled with high monthly commitments, while paying the minimum each month will eventually cost you more owing to the increasing amount of interest.

• In your 30s

By this stage, many of you would be getting married and starting a family, or at least be thinking about it. Here are some mistakes to avoid:

4. Not budgeting and saving properly

There are many commitments and expenses to consider if you already have a family or are planning on starting one. From basic expenses such as your own food and bills, you now have to take into account other costs such as insurance premiums, new clothes, mortgage payments and the like.

Many also take for granted the importance of saving for their children’s education, especially if their kids are still very young. You should start investing in your children as early as possible – some would say as soon as your child is born, if not before!

Consider utilising educational funds such as Tabung Haji and the National Education Savings Scheme (SSPN) to help secure your child’s future.

5. Skipping insurance

For privately employed individuals, most companies offer the benefit of group insurance for employees. Owing to this, many people opt to skip personal life insurance – but this is a bad idea, because if you were to quit or get retrenched, this coverage would cease immediately.

So, get yourself covered by health and/or life insurance as early as possible, bearing in mind that the price of premiums will only go up as you get older.

Also don’t forget to consider insurance for your spouse and children, if applicable, as well as major assets such as home and vehicle coverage.

• In your 40s

By this stage, you should have stable income accompanied by sufficient savings, while managing the recurring and long-term financial requirements of your family. Nevertheless, do avoid these traps:

6. Neglecting your portfolio

This refers to financial assets such as stocks, bonds and other instruments within the your risk appetite. Given the ever-changing nature of the stock market, it is important for you as an investor to be attuned to the economic climate and review your portfolio regularly.

Having a good grasp of market trends will prevent unnecessary losses.

7. Failing to plan for the future

Long-term investment vehicles such as ASB savings and EPF, as well as financial-planning tools such as life insurance and hibah takaful, can help ensure your next phase – retirement – is achievable.

In the meantime, it is also important to make sure your estate is in order by preparing a will and nominating beneficiaries. This will allow your loved ones to be taken care of in the event of an accident or untimely death.

• In your 50s

By the time you reach your 50s, you might be contemplating retirement. However, for this to happen, do watch out for the following:

8. Misusing retirement savings

EPF allows partial or complete withdrawal of your Account 2 balance upon reaching age 50 to aid your retirement. However, many misuse these funds, sometimes out of a sense of obligation such as paying off children’s university fees; other times because of unnecessary expenses.

It has been reported that Malaysians would need at least RM240,000 in EPF to retire comfortably. So, while the money is yours to do with as you will, you should use it prudently.

9. Investing carelessly

It’s a fact: fraudsters tend to target older people. According to the Bukit Aman commercial crime investigation department, many individuals arbitrarily withdraw their savings or take out personal loans to invest in schemes that promise high returns in a short time, only to be scammed of their money.

Again, review your investment portfolio and do your due diligence into any and all investment offers. Remember, if it sounds too good to be true, it probably is!

10. Stopping health insurance

In general, health insurance premiums will become more expensive as you age. Because of this, many choose to stop their coverage to divert money elsewhere.

Don’t make this mistake. The older you are, the higher your risk of health conditions. Coupled with the fact that the cost of medical treatment tends to increase every year, you don’t want to be caught in a situation where you will be out of pocket – or worse – should your health decline.

This article was written by Shafiq Wahab for Qoala Malaysia.