When it comes to money, mistakes – big and small – are often made. Unfortunately, even minor missteps could end up hurting you in the long run.
By identifying and avoiding these blind spots, you can significantly improve your financial outlook. Here are five common mistakes you should be aware and steer clear of.
1. Assuming everything will just work out
It takes planning to move forward in life and attain what you desire. Without a solid plan, goals, and budget, reaching your targets will be difficult.
Remember that “budget” isn’t a bad word – rather, it is your most valuable tool in financial planning as it allows you to determine exactly when and how you should be spending.
2. Dropping health insurance
It’s a blessing not to have to use your health insurance, but it can also be frustrating watching the premium payments reduce your take-home pay.
You might be tempted to drop health insurance, but it is strongly recommended you do not – insurance is something you will regret not having when you need it the most.
A sporting accident, sudden illness, or trip to the emergency room can happen to anyone at any time. Health insurance protects you from costly medical bills, loss of income, and accumulating more debt.
Consider switching to a plan with a higher deductible to lower the monthly payment, and channelling the difference saved into a high-interest savings account. This ensures you continue growing your savings while both your health and bank balance remain protected.
3. Using credit cards for non-emergencies
Swiping for non-essential purchases is another common mistake people make. High-interest credit cards can compound and increase debt in a very short time, and usually with little or nothing to show for.
Emergencies can come up unexpectedly, so it is wise to save a separate emergency fund and only use your credit cards as a backup.
If you have a balance, make it a goal to pay it off and stop using credit cards completely unless absolutely necessary. Try to avoid making only minimum payments on your debt – aim for more, if possible, to lower your interest on the outstanding amount and clear it sooner rather than later.
4. Not having a retirement savings plan
Don’t wait until you buy a home or are completely out of debt – you should start making regular contributions towards your retirement as early as possible.
Experts recommend saving 15% of your monthly salary, but if you are unable to do this, you should still build a nest egg by saving whatever you can.
Even if it seems like retirement is a long way off, the more you contribute earlier, the more time that money has to grow.
5. Allowing peer pressure to make your decisions
Many of life’s milestones will affect your finances: getting married, moving for a career change, buying a house, or starting a family.
Family or friends might pressure you into making haste decisions before you are truly ready, which could leave you with regret, resentment, and a financial burden.
Planning ahead for these events will help you enjoy every moment. Have an actionable plan, detailed budget, and dedicated savings to ensure you avoid financial roadblocks on your road to retirement.
This article first appeared in jobstore.com.
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