Five money blunders to avoid in life
All of us are prone to making financial mistakes, some of which could cause devastating circumstances in our lives. Here are some of the most frequent money blunders to avoid in life to put you on a path to a wealthier future.
The key to curing an overspending habit is to know why you are overspending, and what you are spending excessive money on. Do you use cash as a form of therapy to help you feel good, or are you not keeping track of your spending and underestimating the amount of money you need to save for your bills? The best way to counteract this habit is by tracking your spending with a weekly budget. Divide your income into categories: bills, investing, paying debts, and spending, etc.
Running up your credit card
Credit cards are a tremendous convenience, but they are open to abuse. When you are the owner of a credit card, you feel wealthy, and this feeling encourages impulse spending. The downside of using a credit card, is that it could easily lead you into massive debt if not managed sensibly. Always pay more than the minimum repayment. Although it’s tempting to pay only the minimum repayment, the interest will accrue rapidly. In turn, you’ll end up paying much more than the original price of your purchases. By paying more than the minimum, you’ll avoid paying thousands of dollars in interest. Every little bit adds up!
Spend less than you earn on a continual basis, and you won’t be able to help but save some money. If you spend more than you earn, you will never prosper financially unless you are lucky enough to win the Lotto.
If you are subsisting on a low income, you most likely think you haven’t got enough money left over to save or invest. You should at least try to save up even a small amount to keep in an emergency fund for unexpected expenses. Not having an backup fund will mean you’ll need to take out a loan, which will mean more expense in the long term. Financial experts recommend having at least six months living expenses saved up.
Other important reasons to save include saving for a house deposit, your education, or a car.
Having too much debt
The secret to not being deeply in debt, is to not take on debt in the first place. A home mortgage or investment property loan are the exception. Try to avoid unnecessary loans for items you don’t need. Never build up a credit card debt or other debts except for an absolute emergency when you have no other option.
The rule of thumb for the home mortgage amount you should borrow is not to exceed twice your household’s annual income. This rule applies only if you are not already wealthy.
Neglecting retirement planning
When you’re young, retirement seems too far off to even think about. It is vital to start young to save for retirement to take advantage of compounding interest. Every year you put it off you are missing out on money that would have been available to you at retirement. The best way to plan for retirement is to put extra money into superannuation on top of what your employer pays.
Avoidance of these money blunders will put you well on the path of financial prosperity.
Advice from the financial experts – Set up a self-managed super fund. That way, you’re in total control of your own super fund and no one can get their hands on your hard earned cash. The highly skilled Gold Coast accountants at IQ Accountants can let you know of all the benefits to a self-managed fund. Simply call us today on 07 5576 0011.