What Personal Financial Mistakes Should Everyone Avoid?
We Make Too Many Wrong Mistakes — Yogi Berra
Getting in debt due to bad spending habits such as the uncontrolled use of credit cards can quickly lead you to a downward spiral.
Although you can have the initial luxury of spending and paying for large expenditures, you will find it coming back to bite you.
Interest fees will quickly accumulate when you cannot pay off your balances every month.
If you are late with your payments, you will have to pay penalties which often nullify your cashback and other rewards from your credit cards.
When you keep buying things you do not need, you would soon have to sell things you need.
To overleverage means you have borrowed too much money relative to your ability to pay it back.
A prime example would be to get a big housing mortgage with little to no means of repayment.
It is dangerous to go into the red for sustained periods of time and you will find yourself quickly getting out of the game.
Although you probably would not go to jail for being in debt or being unable to pay your bills, but your credit score will be severely tarnished.
To keep up with the Joneses by showing you have as much money as your neighbours or friends is unwise.
You are spending not because you want it, and you are essentially living beyond your means.
If you are not careful in keeping track of your finances instead, you will end up burning out.
You will eventually collapse trying to keep up with something unsustainable.
Often, lifestyle inflation or lifestyle creep can lead one to go into debt.
Your lifestyle or living standards improve due to an increase in income.
And then you spend more money, sometimes impulsively, on goods that were previously considered luxurious but necessities now.
Not saving enough for major life events such as getting a house, starting a family with babies, preparing for retirement is common for many people.
These events deplete your savings and you might have to take on a large debt to pay for them.
This also means that you are living pay check to pay check and getting stuck in a job you abhor.
Furthermore, getting retrenched without any savings is a horrifying thought.
It takes time to look for another job, but you still need to carry on with your life.
This will be extremely stressful.
Instead of spending off your spare cash, you should consider investing.
It is only through investing that you will stay ahead of inflation.
Without investment, you can never beat inflation and will end up having less purchasing power on hand over time.
Investing helps you to reach retirement earlier and can provide you with a sense of financial security.
Over time, your bills can be paid for with your investment returns.
And you wonder why some of your friends have already quitted their jobs and retired.
People with some money on hand might start to pick up on vices, such as gambling.
Problem gambling and addiction is extremely detrimental to your health.
What gambling does to the brain is to activate and stimulate its reward system, releasing dopamine very much like a drug does.
Facing with the losses, one will feel helpless, lost. This affects your family and everyone around you.