Talking of Finance and no mistakes? Not possible! It’s a human tendency to commit errors but these errors should not be repeated when it pertains to monetary figures. Most, in fact all of us make mistakes in personal finance and listed here are some of the most common ones that have a large impact on the overall personal finance function.
- Absence of a budget- Budget is like a blueprint of what is happening, what will happen and how all this has to be managed- all with finance perspective. A budget makes you jot down the smallest details in black and white so that you have a record ready for anytime reference.People who are not in a habit of making a budget and relying on their grey cells will have to suffer a lot when they forget many intricate details and the whole financial plan for the week or month gets ruined.
- Failure to set targets- Targets are milestones which have to be achieved in any route or travel. It helps to examine the distance travelled and the resources left to cover up the remaining part. People lacking the foresightedness to set targets are not able to manage their daily cash inflows and outflows and run out of money easily. Then they are left with nothing, except borrowing hands.
- Spending beyond earning- Money changes hands very quickly. You can be easily allured by a new tech device, or a new offer on a car, or any such thing, but have you ever thought whether your receiving side permits you to spend the amount or not. People, who are very quick in spending money on each and every item they see, suffer a lot from unavailability of cash during emergencies – needing help by payday loans and other dangerous financing.
They do not hesitate in spending even if they are short of cash. They fulfil their desires through credit cards, not knowing whether their account has balance to support this frivolous spending or not.
Not analysing the financial situation- Some people are in a habit of misinterpreting their financial position. Suppose, during one month, the expenses exceed your receivables. The required action is to keep a check on your spending during later months and be cautious. However, people adopt the option to go for debt to cover up the deficit occurred. They need to know that instead of covering up, they are actually burdening themselves with a greater load – actual amount as well as the interest, and also the liability to pay off the debt.
Careless attitude- Many of us think that personal finance is not our cup of tea. Hence, they appoint a personal finance advisor to keep track of their finances. Even if the transactions are small and can be handled alone easily, why to take up extra burden of paying an outsider when your means do not permit. Won’t the salary and monitoring of the advisor give better results if applied in managing the personal finance on your own!