5 Common Money Mistakes People Make
We’re all guilty of it occasionally, but if we want to have better control over our money and make it work better for us, it’s best to understand how to prevent these frequent money blunders that can seriously harm our financial situation. The top online travel company, Jumia Travel, lists five blunders travelers frequently make.
1. Spending Money You Don’t Have Yet
When your next paycheck arrives, you could be tempted to treat yourself to one or two luxuries while promising yourself that you’ll replenish the funds. However, as soon as the money arrives, you rapidly remember that there are other urgent obligations you need to attend to. In the end, you overspend and are broke until your next payday. This will place you in a difficult financial situation for the time being, and you could even have to borrow money to make ends meet. If you can’t discipline yourself to make the required sacrifices to get out of this situation, you’ll likely fall into a debt trap.
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2. Forgetting That Small Purchases Lead Up to Big Expenses
It might not seem like a big concern at first to spend $500 here for a biscuit and another $500 there for an exotic drink, especially when relaxing on vacation. If you continue spending in this manner for a week, you will have spent $2500 more than you had planned, and while this sum is small, it may easily add up over the course of a month. Small purchases add up, and instead of blowing money carelessly, you could be using it to cover necessary costs like groceries. Pay attention to your “small” expenses because if you don’t, you’ll be shocked at how much they may add up.
3. Not Keeping an Emergency Fund
Never do this because, when these inevitable moments occur, if you are not fully prepared for them, they might leave you entirely destabilized. It is advisable to have some cash set up in a bank account where you can generate interest until a crisis arises. The good news is that even if there is never an emergency, you would have saved up a sizeable sum of money that you can use now or carefully reinvest to increase your wealth.
4. Spending More Than You Earn
This is a straightforward tenet: You either earn more than you spend or spend less than you earn. Your spending should never match your income (because you should set away money for emergencies) or exceed your income (as doing so can result in debt and avoidable. Living paycheck to paycheck (i.e., spending exactly what you make) or building up debt as a result of spending more than you make are both highly uncomfortable lifestyle choices. It is crucial to exercise financial restraint, and you should make the necessary sacrifices or lifestyle adjustments to make your spending more in line with your income.
5. Not Having an Allowance for Entertainment Spending
There isn’t much more that can be stated on this subject other than to advise you to create a budget for your entertainment costs and to have the self-control to rigorously stick to it. Understanding your entertainment demands and establishing a budget based on them can be one way to create an effective budget for your entertainment costs. Then discipline kicks in to help you decide what you can actually live without and what you have to forgo because you simply cannot afford it. Then you may settle into a middle ground with ease, designating an average spending range for your amusement that you’re more likely to stick to.