Nov 01, 2017

Humans are driven by intuition and impulse, more so, when it comes to financial decisions. Lacking the knowledge on how to analyze, plan and execute our personal financial decisions often ends up costing us in the long term, even if the choice is born out of noble intentions. A simple personal financial decision turns into an overhanging financial mistake.

Here is a list of some common personal finance mistakes that we all tend to commit without thinking about the repercussions. 

1. Taking Savings For Granted

All of us have encountered situations where we think about covering our immediate expenses from the savings, and later compensating it with our next pay. These savings could be the ones locked in our cupboard or in a savings account, but the fact is we often tend to exploit them. 

And when the next pay comes in, we either forget or are simply not bothered to deposit the reconciliation. As a result, our savings deplete with time, and this can lead to a lot of unwanted stress.

2. We are Children of Lannisters

We can’t see our relatives and friends suffering. We jump at the opportunity to help those closest to us, who are going through some financial crisis.  Obviously, it is a good gesture to help the ones who are in need, but you should only part with what you are willing to write off as a loss. Remember, the ones we are closest to are at times more liable to take us for granted. So, even if you are lending with the upmost confidence that they will repay you, it is better to assume that you won’t be getting anything back. 

3. Savings and Investments

Most of us tend to save rather than invest. This is simply because we either lack the knowledge about our investment options, consider savings much safer, or we simply think it is too much work to get into the hassle of investments and keeping track of them.

Savings tend to be safer but inflation ends up devaluing your saved money. There may not be anything certain in life but inflation is one thing that is always guaranteed. Investments on the other hand can maximize your earnings, although they can be unsecured at times.

Obviously, no one is recommending that you abandon savings altogether. It is all about striking the right balance. 

4. Education Over Retirement Plans

Those of us who are already in parenthood or are about to get married, tend to save more for our children’s education rather than for our retirement. Although it is a wise idea, it should not come at the expense of your retirement pot. With education attracting global attention, financing options have grown immensely over the years. There are plenty of scholarships and grants available and flexibilities that are being offered by the government on student’s loan.

Yes, the education of your child is important and you should plan for it, but you don’t want to burden them in the future. Manage both! 

5. Credit Cards, Debit Cards and Checks

We often tend to be reckless with our spending and look for convenience along with recklessness. This lures us towards getting a credit card and utilizing it to meet our daily expenses. 

If you are working within your budget, that’s fine, but convenience breeds complacency and we often find ourselves struggling to pay the monthly credit card payments. This traps us into a cycle of debt. Therefore, it is advisable to use debit cards rather than credit cards as they help us work within our budgets. Building a habit of using checks rather than your cards will further help you cut on your spending. 

Not everyone can be Susan Orman or Ivan Massow — but even if we think a little bit before acting, we can avoid those decisions that are bound to be costly financial mistakes in future.

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