Even the best prepared of us can make financial mistakes that harm our finances both immediately and in the future. Many of the mistakes are made unthinkingly, with the person never realizing that they are harming their finances as much as they actually are. Fortunately, many of these mistakes are easily avoided if you are on the lookout for them. Here are some of the most harmful financial mistakes to avoid.
Delaying saving is one of the most harmful financial mistakes you can make. It is important to save money for the future if you ever want to have financial security. Savings will help you pay for unexpected expenses without having to resort to using expensive credit and accumulating debt. Surprisingly, nearly one-third of all Americans have nothing at all saved for the future. You should be saving at least 10 percent of your income for emergency funds, future needs, and retirement savings. If your current budget does not support this, you should cut your expenses and slowly raise the percentage of your income you are saving until you reach your targeted amount.
Splurging On Expensive Purchases
Today’s advertisements try to convince us that we need the latest and greatest expensive products and many people fall for the line, buying expensive electronics and clothing that are not really necessary to enhance their quality of life. All of us know that at least one person that has to have the newest smartphone, the latest fashion accessories, the latest video game system, or new video games as soon as they come out. Retailers love these people because they are paying a premium for things that have not yet demonstrated their value, but purchasing these items on a regular basis waste money that could be better used buying something that provides a better return on investment or being saved for future needs. To avoid this trap, put a strict spending limit in your budget for purchases and only replace items when they are worn out or broken.
Another one of the most common financial mistakes that many people make is avoiding insurance products. There are several reasons why someone may avoid paying for insurance. Some believe that it is too expensive for their budget and the money would be better spent in other ways. Others hold the mindset that they will never collect on the policy so there is no reason to purchase insurance. Unfortunately, when they discover that they actually need insurance to avoid devastating financial losses, it is usually too late. Your home, your possessions, your health, and your life should all be insured to ensure that you don’t face financial devastation when the unthinkable happens.