Published by FrankNez Team.
Chances are, you’ve already made a few personal finance mistakes in your life, or maybe you’ve made more than a few.
There are a few reasons for this.
Even though personal finance is something that we all have to deal with, most people learn surprisingly little about it as they are growing up.
Money is a taboo topic in many families, and it’s not uncommon for people to not have all the knowledge they need to make the best financial decisions even as adults.
Personal finance is rarely taught in schools, at least not in a way that is useful to people.
For these reasons, you shouldn’t feel ashamed if you’ve made any of the mistakes mentioned below, but you should try to educate yourself now so that you avoid them.
Not Talking About Money
You don’t have to go around telling everyone what your salary is, but if you have been brought up with the idea that it’s bad manners to talk about money, you may find yourself unable to discuss important financial matters with your partner or to teach your children about smart money management.
An inability to have this conversation is one reason that finances are a common source of conflict in relationships.
Talking about your own attitude toward money as well as that of the family that you grew up in can help you understand one another better and can clear the air so that you can teach your kids about the topic.
Overusing Credit Cards
It’s so easy to fill out those applications and get another card in the mail and so easy to slap one down for something you want or need instead of saving up for it, but it’s a big mistake if you don’t have the money to pay off the balance at the end of the month.
Why?
The reason is that credit cards nearly always have a high interest rate, and this means that you end up paying a lot more for the product or service or experience than its actual price.
Interest on credit cards can mount up, too, and you can find yourself falling behind on payments.
If there’s something you want or need and you don’t have the money for it, a much better option is to look to personal loans.
You can often apply online for these, and you will nearly always be offered a better repayment plan than you get with a credit card.
Credit cards aren’t all bad.
If you only use them for expenses that you can pay the balance on each month, they can give you cash back and other benefits.
Not Saving for Retirement
If you’ve got other financial pressures, it can be hard to see a portion of your paycheck go away into a fund you may not access for years or decades.
This can be especially hard when you are young and retirement seems a million years away, but there’s no better time to save for it.
You don’t have to invest in the stock market and make yourself cash poor.
But the money that you put away in your 20s will compound in value over the years and be worth far more as you get ready to retire.
However, if your 20s and even your 30s are long behind you, it’s never too late to get started.
Neglecting to Make a Budget
Having a budget is the foundation of all your other smart financial decisions.
However, people often avoid it because they feel anxious about really looking at their financial situation or simply because it seems tedious.
Apps can help you with the process, tracking your spending and showing you where your money is going.
It can also help if you realize that a well-designed budget can remove the anxiety of always worrying about what you can afford.
When all of your spending is in certain categories, you’ll know exactly how often you can eat out or buy clothes this month.
Not Having an Emergency Fund
Everyone knows the feeling of getting paid and immediately having to turn around and put the money toward a car repair or a similar unexpected expense.
A better approach is to work on building up an emergency fund that has several months’ worth of basic expenses in it.
You can turn to this when those inevitable costs that you can’t plan for crop up, from sudden repairs or medical costs to major events such as unemployment.
Also Read: How Can the Average American Pivot in a Recession
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