No one teaches us what to do with our money once we start earning a salary. Most of us end up living day by day, not thinking much about our spending habits or what we’re doing with our money as long as we’re paying our bills.
We’ve heard so many stories about people making bad money choices and suffering the results of them. We’ve been there ourselves and it’s not just about spending too much but also about not considering how to grow your money.
The majority of problematic money situations evolve around 5 common mistakes which we will cover today.
Top 5 Spending Mistakes Most People Make
#1. Spending more than what you earn
When you don’t have control over your money, you spend more than what you should and barely meet the month’s end or sometimes don’t even meet it. When you are not able to meet your monthly needs and commitments because of mindless spending on things you don’t really need, you end up in more debt. The best way to overcome this mistake is to start tracking your spending and plan your monthly budget.
#2. Paying bills too late
If you overspend or if you are not organised with your finances, you often end up paying your bills too late because you forget or because you don’t have the money for them anymore. This results in more interest to pay or in accumulating more debt. The solution here is to either have a bills tracker or to automate absolutely every bill so it goes out via an instant bank deposit and you don’t have to worry whether you paid it or not. This only works if you have the money in the bank for your bills which is why point number one is so important.
#3. Living off credit
We have spoken about living off credit and it can be extremely problematic if you do this to keep up with social appearances, not realising that what you have is probably enough. This is more of an issue in your head than in your habits but if you are true and honest with yourself, you can redefine your priorities and set new financial objectives to help you break this bad habit.
#4. Not being disciplined about your money
To be successful with anything requires discipline and consistency. The same goes for how you manage your money. We wrote our Money Mastering book because there is no education about personal finances in schools so we wanted to teach basic financial literacy to anyone to help them be organised with their money. Discipline starts with deciding on your key priorities, finding ways to achieve them and taking small steps every day towards them. Key money management things to do are tracking your spending, setting up a monthly budget and then deciding on how to tackle debt and savings.
#5. Not planning about the future
When you’re not disciplined and organised with your money, you don’t have the space to think about the future as you’re so bogged down with what’s happening right now. In those situations, you often miss repeating needs or commitments that always happen (like yearly car service), albeit in larger intervals, and so end up stressing about every ‘new surprise’. If you plan well in advance, you’ll be able to foresee issues like this and deal with them almost effortlessly. For example, if you know you will have to have your car checked at the end of the year, then starting to save a small amount of money every month until then is an easy solution to not be shocked with an invoice you can’t pay.
Of course, no one is perfect and we all make mistakes. What matters is to be able to recognise where you might be faltering and find ways to correct it for your own sanity, health and stability.
What mistakes have you made with money?