When people are working on their budget or long-term financial plan, they are making changes to their spending. There are some common mistakes that people make when handling their finances that can come back to bite them in the future, but there are steps that can be taken to fix these mistakes.
- Thinking that things will work out ok in the end – putting your head in the sand and thinking that things will magically work out means that nothing is going to change. You have to create a solid plan to save and to follow a budget which will determine how and when you will spend your money. It is important to know that budget and financial plan are not bad words!
- Relying on your credit cards to get by - if you do this a few times it might not be too difficult to get out of debt, but if you make it a habit then you are liable to rack up a lot of debt in a short period of time. Emergencies can and do come up unexpectedly, so you need to be prepared by starting an emergency savings fund. If you have that you will not need to use your credit card for emergencies. You need to make a goal to pay off your credit card and to not use it for the next year. If you do use it make sure to pay it off each month.
- Failing to plan for retirement – you should be making regular contributions to your retirement plan even if you are in your twenties. The earlier you start the longer you will have for your fund to grow and benefit you in the long run. Contributing to a Registered Retirement Savings Plan is also a good way to save on your tax bill.
- Giving in to pressure to take the next big step – milestones in your life will affect your financial situation, such as getting married, a career change, buying a house or starting a family. Only you can decide when you are ready to take these big steps so do not let friends and family rush you into something that you are not ready for otherwise you might resent the step that you took.
From an article by Miriam Caldwell