personal finance mistakes

6 Common Personal Finance Mistakes You’re Making and How to Fix Them

It doesn’t matter if you are 22 or 62, personal finance mistakes are something we all make and have to fix.

The sooner you start making personal finance a priority the better off your future will be.

Here are some of the most common mistakes that people make and how they can be fixed!

1. Not having emergency savings

emergency fundNot having emergency savings can be devastating and ruin the personal finance journey. If you don’t want to live in fear of emergencies, it is important to save money.

Keep a certain percentage of your income aside and put it into a savings account to avoid using it for other expenses.

That way, you can feel secure in knowing that your personal financial situation is safe from danger.

For example, if you make $500 a week and want to have at least three months of savings (for emergencies), then set aside 5 percent of your income or $25 every week to put into savings.

This will help build up an emergency personal savings account.

2. Overspending on clothes

Overspending on clothes is something that many people do. Mistakes of overspending on clothes start with not understanding the difference between needs and wants.

You need to get personal finance help from experts in order to know where to draw the line. Overspending on clothes can happen when you’re spending more than what you make each month.

Make sure to track your finances and understand where your money is going so that you can avoid this mistake!

3. Ignoring retirement

Ignoring retirement planning is a mistake that might seem far off and unapproachable, but it was made by many people at one point or another.

It’s never too late to start retirement planning and there are many mistakes that you can avoid by doing some research.

4. Making impulse purchases

The personal finance mistake of making impulse purchases is a problem that many people have.

Impulse purchases are caused by not thinking about your current financial situation and what you can afford right now.

The solution to this problem is to make a budget for yourself and set limitations on the amount of money you spend in one week.

This will help you think more carefully when it comes to buying things that you don’t need, so that the temptation to buy impulsively won’t be there.

5. Keeping up with the Joneses

jealousThe mistake of trying to keep up with the Joneses is a common one because it can create a cycle that many people don’t realize they are in.

The cycle starts because people make comparisons between their lives and what other people have on social media.

They are then convinced that they need to buy more expensive things or live in fancier homes or whatever else in order to keep up with everyone else.

The only way out of this mistake is to ask yourself if you really need these things and make decisions based on your needs instead of those of others.

6. Being Afraid of Using Short-Term Loans

The final personal finance mistake that I want to talk about is being afraid of using short-term loans.

You might be thinking, “I don’t want to use a short-term loan. It’s too risky.”

Loans are one tool in the box when it comes to turning your life around and getting on the right track financially.

By using a loan strategically you can turn your life around quickly without all the stress that typically comes along with such a process.

Conclusion:

The 6 common personal finance mistakes we’ve listed are a few of the most prevalent.

If you want to avoid these pitfalls, it is important to understand your current financial situation and what you can afford in order to make better decisions about how much money you spend on things that aren’t necessities.

The best way out of this cycle is not buying more expensive items or living in fancier homes but simply asking yourself if those things are necessary for you personally.

basics of personal finance

The Basics of Personal Finance

Personal finance is much more than just a paycheck.

It’s the decisions we make and the things we do with our money that will have an impact on our lives and futures.

Personal finance includes saving for retirement, paying off your mortgage, buying a home, starting a business, and getting out of debt-just to name a few!

It also includes how you make purchases so that you don’t go into debt or spend more than what is reasonable.

The importance of personal finance

Personal finance is all about personal control. The more personal control you have over your own personal finances, the better you will be able to plan for your future and ensure that you are on the right track.

Personal finance is also about personal responsibility: it’s up to you and not anyone else to make good decisions with your money.

If you have personal control of your personal finances, then you don’t need checklists or reminders or people telling you what to do – you already know!

Steps to take for personal financial success

Review your personal budget

Start with your personal budget. Review what your personal expenses are on a monthly and yearly basis. For instance, personal expenses could include rent and utilities (monthly) or personal income taxes (yearly).

You should also review the personal assets you have acquired like stocks, mutual funds, and bonds. You may also want to review the amount of debt you have for everyday purchases like a car or mortgage.

It is recommended that you list your personal assets from most expensive to least expensive to create an accurate personal balance sheet.

Set personal financial goals

set realistic goalsYou should create personal financial goals, or personal goals, for yourself that you want to achieve over the next year or five years. The personal financial goals you set for yourself should be personal and realistic so they can be accomplished.

Some personal finance personal goals could include paying off your mortgage, starting a business, or retiring by the age of 50.

The first step in reaching your personal financial goal is to create one…

Create a personal emergency fund

The next step in your journey towards personal financial success is to create a personal emergency fund.

This should be a fund saved up for the unpredictable moments that happen in life.

Emergencies might include things like a medical emergency, job loss, or when you need to put out an emergency fire.

You should save up for these emergencies by stashing away $1,000-$2,000 in easily accessible savings account or money market.

Then you can use this money if and when the moment arises without having to go into debt.

Establish a personal retirement plan

The next step in your journey towards retirement is to establish a personal retirement plan.

The IRS will provide some good tips on what you need to know about establishing a personal retirement plan. However, you’ll want to check with your personal accountant as there are many different types of personal retirement plans.

Live within your means

The most important part of personal finance is to live within your means. This not only applies to the amount of money that you make but also to the amount of money that you spend.

Your paycheck might go up by $1,000 next year but if you are spending $1,500 more than you make then this will have a negative impact not just on your finances but on your life in general.

Living within your means is about finding out what is reasonable for your income and making sure that you are staying within those limits so that you can build up savings for future investments or emergencies.

Some people might be tempted to put things on credit cards or borrow from friends and family to buy something expensive they really want. While this might seem like a good idea at the time, it is not in the long term.

If you take the time to establish a personal budget and set goals that are realistic, attainable and based on your needs rather than desires-you’ll be able to live within your means. You can then use this extra money for emergencies or retirement savings which will give you peace of mind as well as financial freedom in the future!