Personal Finance Mistakes to Avoid

A personal finance mistake can cost you years or even decades of your life. It can result in homelessness or financial ruin. But they are usually easy mistakes to avoid once you become aware of them.

Learn about some of the direst mistakes in personal financial management. These mistakes we will discuss today can easily be a slippery slope to financial ruin.

Remember that these mistakes can set you back for decades.

Yet, these are the mistakes that many people default to daily. Usually, this is because they are the financial behaviors modeled to them from a young age.

If you are serious about improving your financial situation, learning about these mistakes and developing a financial plan to get out of or avoid them is the first step to taking control of your finances.

1. Always Being In Debt

Do you believe that always being in debt is normal? Debt gives you access to properties and experiences you can't afford now.

In a world of immediate gratification, it's easy to be mesmerized by the idea of having it now and paying for it tomorrow.

You may have heard the phrase, "It's the only way we can own something."

This phrase makes debt more appealing than working toward something you want.

Why wait to get what you want when you snap a finger, sign some papers, and have it now?

While debt is not always considered harmful, you should avoid constantly being in the middle of paying off your next loan or credit card.

Do your best to pay off your loans, mortgages, and credit cards as quickly as you can. Try to resist the urge to jump into another one before paying it off or as you are finishing.

You can just allow yourself the experience of being debt free before deciding to jump into another obligation.

Use that time of being debt free to establish a rainy day or emergency fund if you don't already have one.

2. Paying High Transaction Costs

Transaction cost is fancy language for the interest you pay on your loans, credit cards, and mortgages.

When you hear a 2 or 3% difference in interest rate, it's easy to assume that it is not much.

Yet, it's vital to review its effect over the long run. Because of compounding, that 2% or 3% can make a significant difference long term.

For most people paying attention to transaction costs may seem like a waste of time. But don't neglect it. Calculate the difference it can make in the long run before agreeing to a higher rate.

3. Living Paycheck to Paycheck

Most people today find themselves living paycheck to paycheck. The idea of having just enough to cover your needs until the next time you get paid should be scary. It should send off alarm bells for someone who is financially responsible.

When you live paycheck to paycheck, it leaves little to no room for life emergencies. Living hand to mouth makes being able to keep up in times of adversity almost impossible.

When something goes wrong, you have zero buffer of time or money to help you get back on your feet.

Living paycheck to paycheck should not be an option since it robs you of the ability to respond calmly during emergencies.

Instead, if you find yourself in this situation, you should attempt to better your current financial position.

Start figuring out ways to cut costs and find a buffer between each pay period so that you can save.

These three mistakes may seem like little things to you, but they are a slippery slope away from losing financial control.

Be careful and try to avoid them at all costs. Pay attention to your debt and the way you manage your money.

You don't want to find yourself trying to keep your head above water because you didn't do something about it, to begin with.

The challenge

Evaluate your financial situation. Identify if you are falling into one or more of these financial mistakes. If you are, make a plan to change it.

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