Learning to manage money means avoiding these common mistakes:
- Not paying yourself first
You owe it to yourself to establish the habit of saving for the future. Money saved compounds. You earn interest on interest.
The goal should be to save and invest ten percent of your income – every month, month after month after month, without fail. Start with a lesser amount if absolutely necessary. The key is to make the discipline of saving an unbreakable habit.
- Not setting spending priorities
Think about your expenses and discretionary spending. Decide what is most important to you and write down your financial goals.
Paying off the mortgage early may be a priority for one person, regular planned giving may be more important for another, education or time out high on the list for another.
What if you don’t establish priorities? You may find yourself unable to pursue what is really important to you because frivolous and unimportant activities have soaked up most of your money.
- Not making a budget
This is elementary, yet remarkably few people practice the habit of budgeting, which may explain why so many people fail to achieve financial independence.
You simply have to learn how to set limits on your monthly expenses, keep track of your spending and stick to a pre-determined budget.
- Not reducing your dependence on debt
Some debt is unavoidable but it is expensive. Flee temptation. Resist those offers from the bank to increase the limit on your credit card. Store cards are another deadly trap.
Do yourself a huge favour – get out of debt as soon as possible, and stay out of debt.
If you don’t owe money to anyone you can’t go bust.