Money Mistakes

How many of mistakes people commit in their life time? And what about money mistakes, Well there are a few even i regret, No i guess i should be more open about it there are a lot of Money mistakes that i regret. But i am learning from my experience now and hope to be even better as i learn along the way. I am listing down some of the common mistakes as below that even i have committed and i really believe everyone should avoid making them as much as possible.

1. Living beyond your means : There is a simple logic we can apply here, if your expenditure is more then your income then in all probability you will be in debt even before you know it. So avoid this at all times. I have done this mistake several times, like just buying a gift for someone close i get carried away and buy something beyond my means and end up in debt.

2. No Budgeting : I guess most of us just forget to Budget, if you don't know where your money is coming from or going to how will you control it. So Budget, it maybe just a simple excel file to do but it needs to be done. You need to know how your money is moving and then only can you plug unnecessary holes, you will have better control over money.

3. To Much Loan : I made a mistake once of taking a personal loan, and then one mistake that i just keep on doing is spending on a credit card. Its a pain now. You certainly cannot avoid taking a loan for the house but then i believe you should only take as much as you think you will be comfortable in repaying. Same goes for any other loan, you don't need to buy a costly car just because it comes with an easy finance option and you can use it to show off.Just be careful while taking a loan.

4. Not Saving Enough : Saving should be treated as any other expense that you incur during the month, if you are making a budget and writing in the expenses column your electricity expenses, your phone bills then also add a column for savings, it should be treated as any other expense and should be paid for every month. Start small and slowly try to increase.

5. Ignoring Disability Insurance : I am not the sole bread winner of my house but i am certainly the primary bread winner and if i were to get disabled due to any reason and which could effect my earning potential, so i got myself a disability insurance, i know it is not enough but i did get something so don't ignore it.

6. Don't Diversify : Have you diversified your portfolio, Diversification can actually spread your risk and help in minimizing it as well,, it can also optimize your returns. You can diversify by investing part of your money in equity through direct purchase, part of it into mutual funds, buy Gold, Buy Real estate and also Debt funds. You could even further diversify your portfolio by investing in different sector funds etc. But Diversification helps since no one can predict accurately how a certain sector of investment is going to perform over long periods.

7. Not taking professional Advice : No Matter how much you have read about financial planning and tax savings etc but you will be surprised by the nitty gritty that a professional can help you with. And its always helpful to take a professional advice whenever you really need it.

8. Not Having goals : Goals give you focus, they give you a benchmark, they help tell you that there is something you have set to achieve and have not done it yet. So go ahead and make goals for yourself. Otherwise you will never know the purpose your investments serve.

4 comments:

Edie said...

This is a great list of mistakes and probably would have kept me out of a bit of trouble if I'd read it a few months ago! I am trying to education myself financially, love this blog and also love the blog/podcast "InvestTalk" with Steve Peasley: http://blog.investtalk.com

Caren said...

Hi,
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Please let me know if you are interested and how much you charge via email carenwilliams@gmail.com
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Julie said...

Thanks for the list of money mistakes. I think another mistake is not having savings of any kind. I represent ShoreBank, who is now giving 3.5% on an online savings account! Our account is really fair, and designed for the customer: there’s a $1 minimum, no monthly fees, 24-hour online access, and of course it’s FDIC insured. Also - ShoreBank invests in socially and environmentally responsible causes. Check this out for more information about the bank: http://shorebankdirect.sbk.com/

On the Money said...

Good list. However, it's important to check out the credentials and reputation of any "professionals" one may consult ...