5 Common Financial Mistakes and How to Recover from Them

What are the common financial mistakes and how do you cope with them?

1. Living on Loaned Money
2. Making Big, Unnecessary Purchases
3. Paying off Debt Using Savings
4. Not Looking into Investing Options
5. Living Large in Your 20s

The hard reality is that life, as simple as it seems, is indeed not all glitz and glamour. More so that it should not be when you are not financially prepared for any emergency that may come your way.

The great news is that regardless of the financial mistakes you have made and whether you have a financial plan in place or not, there is always a chance and room for improvement. One thing to note is that learning can come in two ways, one is from the other’s mistakes, and second, the ones you have made yourself.

In this article, we discussed 8 of the most common financial mistakes every human is guilty of committing at least once in their life as well as the solutions that can be taken to steer clear of them.

Living on Loaned Money

Regardless of whether you are purchasing an essential or a big item, it is never ideal to do so on credit or loan money. Before you know it, you have consumed the item already or it is outdated, and you still have an unpaid bill.

If you are to buy something on credit, the best way to deter yourself from living on borrowed money is to make sure you have at least 3 months’ worth of cash to pay your bill. Otherwise, avoid big purchases at all costs.

Making Big, Unnecessary Purchases

As we have mentioned, purchasing large and unnecessary items on credit comes with great discipline and responsibility. If you keep on missing paying your monthly bill, then it is high time that you changed the way you purchase things. Take note that the credit is still in debt. Whatever amount you have on credit and thereafter is money that you owe.

Some of the biggest items that commonly lead people to mounts and mounts of debt are gadgets, appliances, automobiles, and jewelry with high value. Guaranteed you can argue that some pieces of jewelry are appreciating assets and can be sold whenever, yet there is still nothing beneficial you can get out of it if you know you’ll still end up selling it.

Paying off Debt Using Savings

Paying off money owed using savings is probably the most common mistake that people make. For some people who would normally put their emergency money together with their savings or consider their savings as their emergency money, it is only natural to pay off debt using them.

If you are used to paying off your debt with your very savings, then you are up to living a life in debt because of the way you spend and where you can get money to cover your expenses.

Not Looking into Investing Options

If you are not looking into investing then do not feel left out, not everyone is accustomed to the concept of investing. Fear and uncertainty are two of the most common reactions towards investing and that is because of the technicalities as well as financial jargon that come along with the concept.

The best way to get over the fear of investing is to educate yourself through reading more about the topic. Consulting with an Investment Specialist should also give light to your questions. Joining forums and seminars is also helpful in feeling one with the many people who are interested but unsure of where to begin.

Living Large in Your 20s

When you are in your 20s you think so little about your future. If you do, it may even be just for the near future. Many commit their first financial mistake in their 20s, especially since they are just trying the many things that cannot be done when they lack the financial means to. You also do not have the same amount of financial burden that people in their 30s and 40s will have. So it is natural that you put savings for your future and retirement on the back burner.

If you are in your 30s or 40s and are guilty of committing this mistake when you were in your 20s then pick up where you left off, make the right changes, list down things that you could have done differently, then start correcting them slowly. On the other hand, if you are 20 something reading this, then this is a sign of your recovery and reinventing yourself to ensure you have a better future ahead.

Choose a convenient and secure future over excessive leisure today. Reinvent and recover!

There is light at the end of every tunnel and room for improvement. Keep moving forward, accept your mistakes, make amends for yourself, reinvent your financial plan, and stay disciplined. Over time and with much effort, you will be surprised how simply saying no to your incorrect purchasing behavior can change your life forever.