Personal finance is something that most people should learn. It is not really a subject that anyone can afford to ignore. Lack of knowledge when it comes to personal financial matters can lead to a lot of problems. But what is really disheartening is the fact that people make the same kind of mistakes in connection with their finances. Here are some of those mistakes that consumers keep on making:
Living from Paycheck to Paycheck
Does this sound familiar? You might be in this kind of situation. This is when the immediate expenses are met by the incoming paycheck. When you have not receive the paycheck and yet every penny of it has been allocated already, then you live from paycheck to paycheck. You might also be resorting to your credit cards and picking which one would have enough balance that you can use. When you are in this kind of situation, you always look forward to the time when you will get your next paycheck. Nothing else matters until then.
Living from paycheck to paycheck is hard and risky. What if something happens and you do not get your paycheck as scheduled? The best way to get yourself out of this situation is to open an automatic savings plan. That kind of account would take out a fixed amount from your checking account on a regular basis so you don’t have to do anything on your end and eventually you would have enough amount set aside to act as an emergency fund.
Only One Person is Handling the Finances
In most families there is only one person that handles the finances. That person is the one that pays all the bills and takes control of the budget. That kind of setup is convenient for many families, but it can also lead to some problems. What if the person in charge of the finances is not saving enough? What if that person is not setting aside enough money for other important things?
Ideally, partners should be both aware of their finances. This is a way to ensure that no one would be blamed or left in the darks when money problems start coming in. Partners should share responsibilities when it comes to handling their finances. That’s the best thing to do, so that nasty financial surprises won’t come up in the future.
There is No Spending Limit
A common mistake that people make in connection with personal finance is not having a budget or even a spending limit when it comes to non-essential items. Some families might have clear-cut plans on how much they can spend on certain things, but when it comes to frivolous spending they don’t bother to have a limit. They only realize that there’s something wrong when the bill comes around. But next time they just do it again. This kind of spending should not go on because it can be a real drain.
The best solution to this kind of problem is to have a fix amount that you can spend on non-essential items for a fixed period. One way to do that is to place every member of the family on a spending allowance. That might require some getting used to this situation, but it can work.
Lending within the Family
This happens all the time. People lend money within their family and there is no problem in connection with it, but we also hear a lot of bitter stories and experiences when individuals loaned money to those within their family. This can be disappointing and disheartening. That’s why it is best that lending within the family should not happen.
If you want to help with the finances of a family member it would be better if you just give a gift and not expect anything in return. Expecting something in return would only set you up for disappointment in the future.
The Lack of an Emergency Fund
Are you sure about your job and your financial status? As much as you would want to be certain about those things, you cannot really be too sure. Because of the uncertainty that you face, you must have an emergency fund that you can fall back on. Ideally your emergency fund should be enough to take care of your expenses for at least six months. That is an assurance that if you get sick or if you lose your job that you would have money to spend.
No Plan for Passing of the Primary Wage Earner
Do you have a plan in place just in case the primary wage earner in your family passes away unexpectedly? It is not something that you might want to think about, but you have to. There is always that possibility and it is better to be prepared rather than face the consequences of not knowing what to do in case it happens. To solve this kind of problem, we go back to having an emergency fund. But the emergency fund would only be a temporary solution to the problem. It is better if you were to have a good life insurance policy that you can count on.
Not Educating Children about Finances
One of the biggest lacks in the educational system is the absence of some solid lessons in connection with finances. Children are not taught about how they can handle their finances at school so if you do not teach them that at home then where will they learn that?
The best way to resolve this problem is to give your children some real life lessons concerning how they can handle their money. You can let your children earn money based on the tasks and things that they do. That way they can learn the value of work and money. When they start earning, teach them the value of setting aside a portion of that amount.
In the society that you are in, frugality is something that is frowned upon. Television commercials and all other kinds of ads are promoting materialism. Modern civilization encourages consumption on such a great scale that you might feel compelled to spend money until you have nothing left.
Do not allow yourself to be driven by this feeling against frugality. Learn to buy things that you only need. If the kind of activities that you do force you and bombard you to keep on spending money, then you need a change. Go for activities and groups that would not pressure you into buying things. If you have a need to feel good about yourself then seek some low-cost way of doing that.
Not Utilizing Employee Benefits
Many employers provide excellent benefits. The problem is that the employees themselves are the ones who do not take advantage of those benefits. These benefits can come in so many forms and ignoring those would be like ignoring free cash.
How can you prevent this sort of mistake? All you have to do is to be aware of all the benefits that are being offered by your employer and take advantage of those. There is no reason why you should not use any benefits that you are eligible for.
There are so many mistakes that people make in connection with finances. Some of those mistakes might have been committed by your parents even. There is no reason why you should commit them in your turn. The ones we have listed are just a few of those common mistakes, but you can get started by not making them.