Mistakes you should avoid if you don’t want to go broke

Mistakes you should avoid if you don’t want to go broke

Financial planning is an excellent way of tracking your money and making it work to achieve a bigger goal, but there are certain mistakes that can be made while planning that have devastating consequences.

There are many reasons that can lead to a small bank account, and unfortunately, you can’t control all of them. But there are also certain things you can control and all it takes is a change inhabits.

Here are some mistakes you shouldn’t make if you don’t want to go broke:

1-    Not paying yourself first

To build wealth, you need to save. There’s no other way around it. And the first thing you should do every single time you get a paycheck is saved a portion. Ideally, you will save 10% of your income and then organize your expenses with whatever’s left.

2-    Not having an emergency fund

If you don’t have an emergency fund, you won’t be able to respond in case a serious problem arises. If you lose your job or you have a medical emergency, you might be forced to use credit cards, which have a high-interest rate, or you might dip into your retirement funds or skip other payments to cover for the unexpected one. All these are financial setbacks.

3-    Not creating a budget

You need to have a budget no matter how much money you have. At some point you’ll need to sit down and create a budget, always keeping in mind that you need to save at least 10% of your income first.

4-    Overspending

This one is pretty obvious, but even if it’s ok and actually a good idea to occasionally spend money on things you want, you’ll be better off if you keep focus on what you need first.

5-    Excessive use of credit

If you need to take debt to buy a house or pay for your college tuition, you’ll be doing a reasonable use of your money. But if you incur in debt to purchase things or items you don’t really need right now, you will be creating a bigger problem later on, as you not only will have to pay for the item purchased, but you will also have to pay a high-interest rate on top of it all.

The only way to avoid being broke is by consistently saving money. Have a look at your financial situation and find all the areas that could use some improvement and make the necessary adjustments.

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