20 Tips on How to Avoid Money Mistakes
We as a human we all make mistakes, but when it comes to money mistakes, they usually cost you. Some you can get better from, however, others may have lasting and painful consequences.
As we still fighting against COVID 19, we asked over 50 women and men between their 30s and 50s to share their cash regrets, hoping their 20/20 hindsight will let you emerge as cash wiser in all seasons.
- Here are 20 tips
- 1. Not starting a saving plan early
- 2. Not saving enough
- 3. Not investing sooner
- 4. Not investing smarter
- 5. Not consulting a financial professional
- 6. Not knowing their investment profile
- 7. Not buying insurance in their 20s
- 8. Not having enough insurance
- 9. Saying yes to get rich schemes
- 10. Letting friends influence money decisions
- 11. Lending money to friends
- 12. Lending money to family
- 13. Borrowing money from friends
- 14. Borrowing money from family
- 15. Racking up credit card debt
- 16. Not tracking spending
- 17. An emergency fund that could not cover emergencies
- 18, Not asking for a raise
- 19. Not taking advantage of employer benefits
- 20. Putting their needs last
Here are 20 tips
1. Not starting a saving plan early
If they could relive their 20s, many admit they would have started saving money sooner. Most say they spent too much money shopping, dining, and traveling with no thought to their retirement years. While it’s never too late to start saving, it’s never too early either.
2. Not saving enough
Among those who did sock away some money, they also feel they could have done more. Financial experts suggest saving at least 20 % of your income. Not possible? Then start at 5 % and then 10 % and build it up as high as you can go. Wouldn’t it be nice if you can save as much as 50 %?
3. Not investing sooner
While saving is good, investing is better. With the inflation rate at least 500 % higher than the interest rate you can earn on savings accounts, that means your money is losing value over time. Consult a financial professional on how you can beat inflation and make your money work harder.
4. Not investing smarter
It’s not easy to time the stock market or any investment for that matter. If you try to handle your investment portfolio on your own, you may make mistakes you can’t afford. Do not go into any investment without understanding it, and making an informed choice.
5. Not consulting a financial professional
We all like to go to family and friends for advice because we trust them. But when it comes to money, consider asking financial experts too. They can help you understand what’s happening in the increasingly volatile global market and the products available for you.
6. Not knowing their investment profile
A financial professional can also help you understand your risk appetite (are you an aggressive investor or more conservative) and time horizon (can you wait to see returns in 5 or 10 years or will want to redeem after one year). These will largely determine the right investment products for you, so you avoid penalties and losses.
7. Not buying insurance in their 20s
Did you know that the probabilities of accident and death grow exponentially higher for people over 40? So the younger you are when you buy insurance, the lower the cost of premiums, and you can add more as you have more dependents, grow older, and your income grows.
8. Not having enough insurance
In the past, the rule of thumb was for individuals to be insured for at least 10 times their annual expenses or income. If this comes as a shock to you, well, brace yourself for more. With rising inflation and the historically low interest rates, financial advisors are now recommending to own insurance at least 20 times one’s annual income or expenses.
9. Saying yes to get rich schemes
When someone makes you an offer that sounds too good to be true, it likely is. Most fraudsters start by offering fantastic returns — 1000 percent more than what you can get in say a regular time deposit — so you say yes instead of no as your gut tells you.
10. Letting friends influence money decisions
Nine out of 10 victims of pyramid schemes were recruited by friends, even family. That’s because fraudsters know you will find it difficult to turn them down so they designed their scam to work that way. Your family and friends may be victims too, or not, but most of the blame will still be on you for saying yes.
11. Lending money to friends
It may be for a small amount like to cover a meal when you were dining out, or something bigger like to help out with medical expenses. Either way, when you lend out money, it’s always best to ask how you will be paid back and when. If you don’t ask, chances are your friend will think this is not important to you and take liberties.
12. Lending money to family
If you can’t say no to friends, it’s harder to say no to relatives. Again, rules are important especially when it involves bigger sums. Set out dates of payment and how you will be paid. Better if they can issue checks so you do not have to collect later. It’s important when lending to friends and family that they understand you expect to be paid back.
13. Borrowing money from friends
It’s just as difficult to find yourself on the other side of the fence and borrowing money. The golden rule applies here very well: do unto others what you want others to do unto you. Explain why you need to borrow, and when you plan to pay it back. Offer to pay interest if it’s a big amount and you will pay over a longer period.
14. Borrowing money from family
Most children turn to their parents or uncles or aunts or grandparents for financial support when money is tight. Make it clear that you will pay them back, and in case you miss the promised payment date, reach out and tell them. Remember, they are older and likely no longer working. That could be from their retirement fund and they need it too.
15. Racking up credit card debt
One of the worse debt holes to get into is credit card debt. It is almost impossible to get out of it, particularly if you are only paying the minimum amount every month to keep your head above water. Stop using your credit card, and negotiate for lower interest for a fixed payment plan to start crawling your way out of it.
16. Not tracking spending
Budgets are boring and tracking your expenses even more. But these two will lay the groundwork for a brighter money future for you. Unless you know how much you are spending and where your money goes, you cannot make healthier adjustments, like shopping or traveling less, and saving or investing more.
17. An emergency fund that could not cover emergencies
Apart from your savings plan, you also need to set up an emergency fund that can cover your expenses for 6 to 12 months should you lose a job, fall ill, or suffer an accident. We do not like to think of these things happening to us, but they can, so it’s better if your emergency fund can help you weather the storm when it hits.
18, Not asking for a raise
No employee has ever complained they received too much of a raise, but many feel they are not paid enough. Do something about it and ask your boss for a raise. Be ready with your arguments. When was the last time you got one and how much? What is the industry standard for your work and position?
19. Not taking advantage of employer benefits
If you’re looking for ways to save, one good place is the employee handbook. Many employed staff is not aware of the full complement of benefits they could be enjoying, such as paid leaves, tuition reimbursement, zero-interest emergency loans, and medical insurance.
20. Putting their needs last
The first commandment in personal finance is Pay Yourself First, meaning, when you get your salary or any income, set aside a fixed amount for you.
Only after will you pay the bills and other expenses?
However, most do it the other way: they pay for bills, expenses, help out family and friends, and if there is anything left over, that’s when they may treat themselves or put it away as savings.
Why not leave all these money mistakes behind and put yourself first?
Commit to a savings plan and always make that first on your list during payday.
Invest in yourself and look for ways you can grow your knowledge and upgrade your skills.
Remember you’re in the driver’s seat and your financial future and security are all in your hands.