It doesn’t matter how much money you make; it all boils down to how you spend it. Many people experience financial difficulties as a result of their poor financial habits and lack of planning.
Even though many financial organizations, such as Alex Bank, offer financial assistance in the form of loans, many people fail to take advantage of these opportunities, resulting in a slew of easily avoidable financial troubles.
Having a thorough understanding of your financial condition, though, can be beneficial. If you want to avoid financial disasters, stay away from these six common financial mistakes.
1. Frivolous and expensive spending
The world of online shopping has a dark side that anyone rarely talks about. Though it can be highly convenient to buy things from the comfort of your home, many people have fallen prey to shopaholism.
Thanks to the convenience afforded by online shopping, people are more likely to buy things they don’t need or can’t afford. The urge to spend money on frivolous and expensive items can create a massive burden on your pocket.
Unnecessary spending not only takes a big chunk out of your pocket, but it also doesn’t offer nearly enough value for your money.
For example, you may like a chandelier worth $5000, but at the end of the day, it is simply a source of light, and you could probably get the same level of brightness from a $100 LED bulb. Thus, the chandelier offers no real value for the extra money, other than, of course, the aesthetic appeal.
If you can avoid such expenses, you can save a significant amount of money in the long run.
2. Buying a new car when you can’t afford it
Paying a down payment and affording a car is a whole different thing. You may be able to pay the down payment amount easily, but invite a much larger car loan that you will struggle to pay off with your limited income streams.
People also forget about the maintenance and fuel cost that comes with owning a car. Also, Don’t forget that the car value depreciates as soon as it leaves the car dealership.
Owning a brand new shiny car is a dream for most young adults, but it won’t be a wise choice if you are already in poor financial condition.
3. Not pursuing financial education.
Though schools and educational institutes have financial studies in their curriculums, they are not very relevant to the financial needs of today’s young adults.
The only source of financial education is the parents and what people learn from their peers. That’s why a vast number of young adults commit to financial transactions they do not fully understand.
That is why it is essential to pursue financial education to make better monetary decisions. You can learn from numerous free online and offline workshops and classes to understand the basics of financial practices and how you can leverage that knowledge to improve your existing financial situation.
Also Read: Money Management: Key Steps to Take
4. Continuing recurring payments
Monthly or annually recurring payments like music services, cable televisions, entertainment sites and gym memberships make you pay their subscription fees without an end.
Once you are addicted to such mindless consumption, you get stuck in an endless cycle of recurring payments without owning anything.
It would be better to think about whether you need those things or not. Letting go of such recurring fees can give your wallet a lot of relief.
5. Borrowing money from untrustworthy sources
Borrowing money from untrustworthy sources is the same as inviting unforeseen financial problems into your life.
Many people borrow money from private money lenders out of desperation or ignorance (or both) and get stuck with long-term loans with high-interest rates and unfair repayment policies.
It’s best to borrow money from trusted sources like Alex Bank to ensure you get the best interest rates on your loans without compromising the safety and security of your money.
6. Spending too much money on a house
A house may feel like a significant investment, but in reality, it can be a massive financial burden on many people. People usually underestimate the cost of upkeep and maintenance of a big house.
They buy bigger houses they cannot afford and end up spending thousands on taxes, maintenance and repair. It’s best to buy a good home that you can afford to live in and maintain. It makes no sense to invite unnecessary expenses, especially ones you cannot afford in the long run.
Achieving financial independence doesn’t have to be difficult, especially when there are different sources that you can use to educate yourself so you can make better decisions. While you learn to make better financial decisions, try to steer away from these common financial mistakes.