Basic Money Mistakes Every Individual Makes and How to Avoid It
"Your salary has been credited to your account." Who doesn't get excited about this message? But remember, a wise man once said that it's not your salary that makes you rich, it's your spending habits. You live life king size in the first week of the month. By the time it's the last week, you tend to survive on the bare minimum. Your happiness can turn into financial mayhem if you are not careful about your money habits. Here are four common money mistakes that you can avoid.
Living beyond your means: It is said that rich people stay rich by living like they are broke. And, broke people stay broke by living like they are rich. Today, each one of us is living a materialistic life. It is believed that the more you own, the more successful you are. The state is such that people have started resorting to loans for living as per the societal standards. However, this is an ill-advised way of living and would lead you to a financial mess. To avoid this, you should stick to a budget. The 50/20/30 rule may help. As per this rule, 50% of your monthly income must be for your monthly expenses, while 30% can be kept aside for your entertainment and leisure. And, you must save and invest the remaining 20%.
No robust retirement plans: Death is certain and so is retirement. Have you saved enough for your old age? Saving for the recurring expenses from your peak working days could be your best bet. Start keeping aside some percentage of your hard-earned money for your future, and let the compound interest do the miracle for you. Many in the organized sector have the privilege of getting retirement plans from their company. Make the most of it by contributing as much as possible.
Not saving for emergencies: Life is full of surprises- good and bad. If preparing for good times is necessary, be prepared for tough times, which are inevitable. Without any financial support, you are more likely to fall prey to high-interest loans. Thus, having an emergency fund is like having a cushion that can act as a buffer until the time you get back on your feet.
Emotions-driven investing: Investing based on the daily headlines could be troublesome. A glad tiding may make you want to invest without a lot of thought. On the other hand, an unfavourable news may make you panic and run away. Either way, you may lose out on opportunities. Emotions may either cause you to take more than you can handle or could deter you from doing something that is beneficial for you. Thus, it is advisable to keep emotions and money matters separate.
Conclusion: Managing money could be a tricky affair, especially when you are at the start of your career. To err is human. But not learning from the mistakes can be devastating. Use these tips and avoid making these basic money mistakes in your daily life.
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