Five financial rookie mistakes
Often, money management at home is treated superficially and it doesn’t go beyond adding income and expenses. If you are used to tracking your finances, you might be surprised to learn that there are a lot of people who aren’t aware of how something as simple as managing your own goods works.
However, there are a lot of people who haven’t walked on this path yet and they end up making, at least, these five basic financial mistakes that can mean a significant and unnecessary loss of money:
1-Thinking that credit cards are a bank account extension.
Credit cards might make people fall into debt since they don’t know how to control their impulse buying and that don’t have the mindset of what it means to have that piece of plastic in their pockets: it is a loan that you have to pay back. Depending on the approach of its use it can become a crucial mistake when it is done over and over again without even thinking that it must be paid with money that is already available in the bank account.
2-Not having a budget
At Unidos, we cannot stress enough how important it is to budget since it is the foundation for getting to know your finances. Without knowing how much money we receive and how much we spent at any given time, we are going to be unaware of the basic information that allows us to understand how we can make the most of our financial capital.
3-Not asking questions
Although it might seem a bit weird, a lot of people create their bank account, ask for a loan, or acquire insurance without asking any questions. A lot of things are indicated by the bank or insurance companies and they can play with the clients’ ignorance. Each detail that you consider important must be asked, including the costs that the bank charges for errands that actually can be made by ourselves, especially when it comes to paperwork around mortgage and loans. Sometimes we are okay with being charged monthly for insurance, without even asking if there is a cost reduction when paying the annual fee at once, lowering the cost through a discount. Make sure to ask all the questions you have, follow up with what they are offering you, and prepare yourself to make any claims if you need to do so.
4-Not being prepared for the unexpected
Many people are indeed living with the basics and they can’t afford thinking having too much planning, but it’s also a fact that having an emergency fund for unexpected situations is not among the priorities that people have around saved money. Even if it doesn’t seem enough, it’s better to save one dollar per month to start building your emergency fund rather than not including it as one of the key financial elements that require our attention.
5-Living a lifestyle that we can’t afford
Sadly, this happens more often than not in societies. The world that we are living in can make us fall under pressure to buy goods and do things that we cannot afford because they are way above our economy. Not being able to accept that each person’s situation is different and that it depends on many things, leading up to making catastrophic mistakes for our finances. Probably this is one of the toughest mistakes to be changed since it involves a lot of emotions, such as fear of missing out (FOMO) or feeling rejected by your social group.
If you are one of those people who feel that had made or are currently making some of these mistakes, do not panic. The fact that you conscious about your behavior can help to improve your financial situation and you will see the advantages of being more alert about the way you use your money.