Personal finance skills are critical to have in every aspect of your life, that is why it is crucial to recognize several pitfalls that need to be avoided to avoid financial issues.
Excessive Spending
These could be a German luxury car or an annual trip to Hawaii that you can’t afford. But excessive spending could also be the little things: the daily large latte or restaurants on the weekend. What is excessive depends on the person and what their financial situation is. How much is your income? What are your fixed expenses and level of debt?
Cutting excessive spending is very doable. Have a long and complex discussion with your partner. Take a look at your records and see where your spending is going.
Some people find budgeting to be beneficial. You can cut up your credit cards and go all cash. Set an agreement to consult each other on any large purchase.
Recurring Payments
Over time, subscription payments like cable, streaming services, and app purchases add up. Set aside a few hours to review all your recurring expenses and get rid of those you don’t use anymore.
You can get creative. Use only one streaming service at a time. When you’re done with all the shows and movies on one, switch to another. Get rid of the gym and run outside or buy a set of dumbbells.
Borrowing Money
Whether with a credit card or a payday loan, taking out loans is expensive. It’s also stressful. If you have to take out a loan, minimize the amount and immediately cut your living expenses. Pay it off as soon as possible.
Buying a New Car
New cars are expensive because they depreciate rapidly. Often, you can buy a used one at a fraction of its original value. Buy used if you want a bargain.
Living Paycheck to Paycheck
This is very risky because you’re one unexpected expense from a serious issue. A cost will eventually come along, whether a speeding ticket or car repair. Not only might it mean going into debt, but it will stress you out. Have an emergency fund for situations like this.
Not Investing
Make your money work for you. You don’t need to be a genius to start investing. Look at index or mutual funds. There is plenty of information available online.