- Financial Series: Financial Basics
Financial Series: Financial Basics
Understand the basics as you plan your finances.
Table of Contents
- Don't Burn Your Money: Avoiding Financial Planning Mistakes
- Grow Your Funds: Your Financial Planning Rules
- Your Budget and You
- Assessing Your Financial Health
- Saving For Emergencies
- Overcoming Financial Stress
- How To Calculate Your Net Worth
- What About Your Income Streams?
- Calculate Your Interest
- It's Your Bank and Bank Accounts
Partial First Article
Don’t Burn Your Money: Avoiding Financial Planning Mistakes
Successful financial planning doesn’t happen by accident. It’s a process that must be followed carefully. Half the battle is in avoiding the mistakes and pitfalls which trip most people up.
In this article, we’ll look at 5 common financial planning mistakes which will impede your progress. Being aware of what they are is crucial to ensure that you save up a sizeable nest egg and have enough money to last you into your golden years.
1. Not having a plan
There’s an old quote, “A goal without a plan is just a wish.”
That’s 100% true here. You must create a good plan and follow it if you wish to be financially healthy.
Assess your financial health. Look at your debts. Decide how much you want to save, invest, and do what you need to do to save money and remove debt. Aim to improve gradually.
Not taking ownership of a debt problem and remedying it swiftly will only cause it to snowball and become more difficult to handle. Too often, people fear looking at their debts.
It all just seems too overwhelming. So they mentally shelve it away into the dark recesses of their mind thinking that the problem will go away. Almost always, it NEVER does
In fact, it’ll become even more obvious. The bills will become more frequent. The creditors will start calling you. If you ever thought no one cared about you, you’ll now realize just how many people do when you fail to pay your bills on time.
You must address your financial troubles as soon as possible.
3. Lifestyle creep
‘Lifestyle creep’ is a term used to describe a situation where you start spending more just because you’re earning more. For example, you may have been on a tight budget before when you were earning a salary of $3,000 a month
So you find a new job that pays you $4,500 a month. That’s fantastic. You now have $1,500 extra disposable income. However, instead of paying off your debt and saving more, you decide to sell your old car and buy a newer flashier car. After all, you can afford it now.
What happens next is that a sizeable chunk of your extra $1.5k is going towards paying for the new car’s monthly instalments. You’re back on a tight budget… because you’ve taken on new commitments.
Just because you earn more doesn’t mean that you have to spend more. Like the quote at the top of this article said, what matters is not how much you earn. It’s how much you keep.
So, don’t let lifestyle creep throw a wrench in the works and adversely affect your financial planning.......