Finance aspect of everyone’s live should be handled with utmost attention to detail. It is quite normal to make small mistake in financial life but be vigilant that it does not grow to big issues. Make use of mistakes as a learning experience, this will help in avoiding repetition of mistakes. Repeating mistakes again and again whether small or big is not a good sign. These can come back haunting you in later part of the life with huge financial demand to clear them off. Analyze your financial decisions and make a judgment on whether it is good and beneficial or bad.
Here are Some of the Financial Mistakes that should be Avoided
- Cash Flow not Monitored:
As soon as you start earning start tracking how the money is being spent. At the initial stages you can start with a small book to note down the expenses and payments made from your income. This will help you to understand where major part of money is being utilized. Money is usually spent either on expenses, investments or entertainments. Through monitoring money right from the start you will be able to check what are the expenses, investments and entertainments spending percentage. As long the investments are about 50% on your income, you are playing the cards safely. Monitoring income and expenses will help you in controlling expenses to a certain extent.
- Expenditure more than Income:
Those who are salary based will have a specific amount of income which they can plan at the beginning of the month and segregate based on expenses and savings. However, on the other hand, you own a business; the financial part will be not as easy unless you have very good returns from business. Make sure that you are not in a situation where the expenses are more than income. Always strike a balance between these to lead a happy life. Those who are into business should make use of alternative regular incomes to manage times with “no returns”. In case if there are additional funds in hand, spare them for emergency requirements like medication, joblessness etc.
- No Plans for Retirement Savings:
Start saving towards your retirement from day one. It is good to have a retirement goal in life to keep you motivated. Plan for a world tour during your retirement age and start savings and investing towards it from now. Else you will start draining your income on entertainments and expenses instead of savings. You and your spouse should take equal interest in saving some amount from every month’s paycheck. Consider your income as the amount (Take home amount-savings). Plan all your expenses with this mindset and you will definitely be able to relax later part of the years when health is not in your control anymore.
- Building Debts with High Rate of Interest:
Debt free life is nearly impossible and it is alright to have debt to a certain extent to enjoy some tax benefits and so on. For example, a home loan debt is a good debt as it will help you save tax on your income. However do not get yourself involved into high rate of interest debts as these can eat away all your ability to save money from income. Paying high interest loan EMI will also demotivate you to save and you will get into a situation where expenditure is more than income.
- Not Asking the Right Questions at the Right Time:
Keep questioning your investment plans often. It can be true that 3 years back a financial decision you made was great but revisit it now and then to check if it is still the best option for investment among all the other alternatives available. Do not have commitment with anyone with regard to debts. You should be able to make your own decisions and be ready to take the blame. It is wise to take advice but decisions should be independent and realistic. People will be ready to give all sorts of advice but it is up to each of us to scrutinize and understand which is actually good and healthy for a peaceful life ahead.
Always keep in mind your commitments and the role you have to play in the family before making any financial commitments. Pay attention to every penny that is spend and be patient on the investments you have made. Don’t expect huge returns on your investments within the initial 4-5 years. Give enough time for it to reap its value to the maximum. Always be positive and think you are young and still energetic. Even at 50, if you still have the earning power then consider it as a blessing. There are many out there who have all money in their life but no health to enjoy it.
Also no job is 100% safe these days. Don’t always be worried about performance and improving your income. Learn how to effective manage and utilize the available income irrespective of how small or big it is.