…and Henry screamed this was a costly financial mistake! Henry is a businessman known for his prowess in selling anything that he decides to sell. He had an eye for the market and was the envy of many persons in the same business line.
Over time, he had an investment into another line of business with a return on investment (ROI) that seemed very promising. He did invest the money, but unfortunately for him, there were several financial considerations and decisions that he should have made before doing that he didn’t do, which cost him quite a lot. Henry learned from this but the hard way.
In this article, we’ll keep you abreast with financial information, and to see that you are financially free that we are bringing to you the 15 Biggest Financial Mistakes People Make so that you wouldn’t make the mistake Henry made or any other financial mistake as you would get to know in this write up. So, stay with us!
Table of contents
- What Financial Problems Do People Have?
- What Are Some Of The Worst Financial Decisions?
- How To Recover From Bad Financial Decisions
- Most Common Mistakes In Managing Money
- What Financial Mistakes Should I Refrain From?
- What Are The Biggest Financial Mistakes People Make In 2023?
- 1. Copying other Investors
- 2. Acting on unprofessional advice
- 3. Not knowing where you are Spending
- 4. Not having a monthly budget
- 5. Insurance Policies in Children’s name
- 6. No Goal-Based Investment Planning
- 7. Not earning money in your free time
- 8. Lending money to friends when you can’t afford it
- 9. Not having and maintaining an emergency fund
- 10. Not taking out insurance
- 11. Having unrealistic financial goals
- 12. Not negotiating a salary when starting a job
- 13. Swiping credit card for all big & small ticket expenses
- 14. Having a skewed investment asset allocation
- 15. Paying more tax than you should without realizing
- Frequently Asked Questions
- Conclusion
- References
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What Financial Problems Do People Have?
Financial problems are those issues/problems that individuals have that make them unable to pay debts over the short or long term.
These financial problems/indebtedness complicate financial management and limit purchasing power. The difficulties associated with finance become a source of stress until all debts are paid.
For debt reimbursement to occur, a solution is developed to address financial problems.
Some of the financial problems that people have include:
- Less income
- Lack of financial organization
- No or poor savings
- Much indebtedness
- Job loss
- High cost in health-care
- Not being on the same page with your spouse.
- Lacking investment know-how
- All-around financial stress.
- Not having enough income.
What Are Some Of The Worst Financial Decisions?
In making financial decisions (building wealth, saving), there are several excuses you can come up with as to why you are yet to do certain things, but that doesn’t speak well of financial maturity.
You can also probably come up with a long list of your worst financial decisions. And perhaps the excuses for the steps you haven’t taken are tied to these decisions you regret.
To avoid being a victim of the worst financial decisions, you must start learning about financial knowledge as early as possible. The good thing about money is that not minding the wrong financial decisions you might have made, the room for improvement is always open when it comes to money.
In addition, you mustn’t be the one to make these mistakes to learn from them. There are many opportunities to improve financially, and one of the ways is to learn from the mistakes of others.
Some of the worst financial decisions you can make and remedies to them include
1. Not saving any of your monthly income.
Remedy:
Establish the habit of creating and working with a monthly budget and making it a point to save a minimum of 10% of your monthly income before you start with expenditure.
Automate your deposits to your savings account, enabling you to stick to your savings goals easily.
2. Living large in your 20s
Remedy:
Always have the future at heart.
Learn how to budget and stick to it. In addition, in your scale of preferences, let your future financial well-being be your priority over your wants.
3. Making large and unnecessary purchases
Remedy: Always believe that credit is debt and nothing less than debt. You must stop using your credit card and set up a debt repayment plan to get out of this.
4. Not paying off your credit card
Remedy: Save yourself interest payments, pay up your debt as quickly as you can, and start repurposing that money towards saving and investing.
5. Putting off financial decisions
Remedy: Start planning for your financial future as early as possible.
6. Not investing
Remedy: The remedy to this is to invest, but before venturing into that, it is needful that you
research and understand the basics of what you are putting your money into.
7. Not having a backup plan
Remedy: Having a backup plan that generally protects you from unplanned and expensive life occurrences.
RELATED POST: How to make money from savings | True Advice
How To Recover From Bad Financial Decisions
To recover from bad financial decisions, you are to follow the following steps:
- Acknowledge your money mistake, forgive yourself, and let go.
- Decide to take on action toward changing your financial situation
- Receive motivation and shift your circle of influence
Most Common Mistakes In Managing Money
The most common mistakes in managing money include:
1. Excessive and Frivolous Spending
Excessive and frivolous spending is among the biggest and most common mistakes in managing money.
You are to note that there are no two ways great fortunes are often lost, if not one dollar at a time. So, it might look like no big deal when you pick up those times little by little, but they all add up. So as much as time, try to restrict yourself from frivolous and excessive spending.
2. Never-Ending Payments
Never-ending expenses are something you must avoid if you want to avoid making the biggest financial mistakes.
Never-ending expenses emanate from having/keeping items that keep you paying monthly or yearly. To escape never-ending expenses, you must create a leaner lifestyle, as it will help fatten your savings and cushion yourself from financial hardship.
3. Living on Borrowed Money
Buying essential things with credit cards has become somewhat commonplace, but that’s a financial red flag.
You must avoid living on borrowed money to avoid the most common management mistakes.
4. Buying a New Car
Buying a car is not bad on its own. Still, it becomes one of the most common financial mistakes in managing money when you’ve checked your financial history, capacity, and capability to know whether you can cope with the responsibilities of maintenance, etc, that come along with owning a car. So, checking well before you get one will be due diligence!
Other most common mistakes in managing money include the following
- Too many expenses on your house
- Living Paycheck to Paycheck
- Not Investing in Retirement
- Paying Off Debt With Savings
- Not Having a Plan for your financial future
What Financial Mistakes Should I Refrain From?
It wouldn’t be nice if you make the same mistake that some individuals have made and have related. It is wise to be on the outlook for these mistakes and get to know what caused them and ensure that you don’t repeat them.
The financial mistakes you should refrain from are:
- Lending money kept in your custody.
- Spending by impulse & engaging in unplanned expenses.
- Saying and thinking that money will always come.
- Spending is based on other people’s purses.
- Don’t buy with the hope that someone else will pick up the bill.
- Spending money before It gets to you.
- Spending money meant for a particular task.
- Depending on the generosity of strangers.
What Are The Biggest Financial Mistakes People Make In 2023?
To have a better financial future in 2023, there are several money mistakes you should avoid, and they include:
1. Copying other Investors
Just as we are different, so are your needs, risk attitude, responsibilities, family profile, and everything different. This being the case, you shouldn’t jump on any advice given to you by anyone on TV Channel or newspaper story without proper findings on whether the advice would go well with you.
2. Acting on unprofessional advice
Before taking up advice, you should do due diligence to confirm whether the advice is professional. You shouldn’t go by advice because it was given to you by your family, friends, or well-wishers but because it comes from tested and proven financial advisors aside from other considerations that you should put into place.
3. Not knowing where you are Spending
Not knowing where you are spending is among the biggest financial mistakes.
If your money is in your control, you should know; you should know where you spend your money. It is financial irresponsibility not to know where you are spending your money.
4. Not having a monthly budget
Not having a monthly budget is a way to live beyond your means and is among the commonest money mistakes many individuals fall prey to.
The issue here is continuing in a lifestyle that you can’t afford. There are times when not having a monthly budget wouldn’t harm, but it becomes a danger when it starts becoming a habit. So, watch it!
READ ALSO: 10 Steps To A Budget Made Easy Process
5. Insurance Policies in Children’s name
Buying insurance policies in your children’s name, as much as it looks like one of the best decisions, might not be the best. This is because you need insurance coverage much more than your child. The insurance cover ends up securing your child’s future if something bad happens to you.
6. No Goal-Based Investment Planning
Investing for goals is an investment that yields better in the long run and pays off the most. Many people make one of the biggest financial mistakes by investing money to multiply faster. This lure has been proven to get people into the wrong products.
7. Not earning money in your free time
It is very important to make money in your free time. This is the case because it is one of the ways to stay ahead financially. It’s a way to get a bit of extra income hence has the ability to propel someone towards his/her long-term financial goals.
SEE ALSO: 13 Ways to Make Money in Real Estate with no Money
8. Lending money to friends when you can’t afford it
Lending money you don’t have to your friends does not make you a nice person. It rather puts you in a financial mess where you struggle to meet or make up for the big hole dug.
This is one of the financial red flags to be conscious of.
9. Not having and maintaining an emergency fund
There are several forms of emergencies, and they can strike at any time. In this regard, you must be prepared for it at each point. I advise you to always have a well-planned emergency fund (3-6 months of expenses). You should have very easy access to the emergency fund, and it should be a safe financial instrument. This emergency fund should not be used for risk-taking.
10. Not taking out insurance
Among the very many things that COVID-19 taught us is the need to take out insurance.
The benefits that come with an insurance policy include;
- The payment of losses.
- Indemnification of individuals and organizations for covered losses.
- Managing cash flow uncertainty.
- Provision of payment for covered losses when they occur.
11. Having unrealistic financial goals
Unrealistic financial goals are one of the biggest financial mistakes you will make in 2023. Doing this is just like not having a SMART financial goal that must be specific, measurable, achievable, realistic, and time-bound.
To have realistic financial goals, you are to do the following:
- Take time and write a list of things you want to accomplish.
- Affix a realistic timeframe to each of the things you want to accomplish.
- Find out how much you’d need to save weekly or monthly to get there.
- Keep the money to achieve these goals separate from your emergency fund.
12. Not negotiating a salary when starting a job
Not negotiating a salary when starting a job is among the biggest financial mistakes.
Negotiating your salary with your employer ensures you have up to the money required to cover basic needs such as food and rent from the get-go.
On the other hand, this helps you to set the tone of your relationship with your employer and places you at your rightful worth.
READ ALSO: Salary Vs Hourly Employees: Difference And Similarities
13. Swiping credit card for all big & small ticket expenses
This is among the biggest financial mistakes you wouldn’t want to make in 2023. This deals with making use of your credit card for every purchase. Not having financial knowledge does not suggest that the use of credit cards is harmful, but It does hurt in the long run. So, avoid this by keeping a check on your credit card usage!
14. Having a skewed investment asset allocation
Having a skewed investment asset allocation means having a biased and distorted investment.
To avoid a skewed investment asset allocation, you must have a mix of asset classes in line with your risk profile. Even for the Conservative Investor, for him/her to succeed financially, he/she has to have some percentage of Equity in their Investments. The Aggressive investor must ignore debt completely. For everyone that wants to have a good investment portfolio, there’s the need to get his/her better post-tax returns higher than Inflation.
READ ALSO: 15 Best Investment Apps
15. Paying more tax than you should without realizing
Paying more tax than you should without realizing is among the biggest financial mistakes.
You are to ensure that you have the knowledge on how to read your payslip. Not having this knowledge means you don’t know when to claim a tax rebate.
Read also: Why Every Business needs a Tax Attorney | A Must Read
Frequently Asked Questions
The worst financial decisions you can make include: Not saving for retirement, paying bills late, failing to monitor your credit, putting more money toward your mortgage when you have other debt, Not exploring financial aid for your student’s education, Paying the minimum balance on your credit card bill, having no emergency fund, not having a budget, failing to take advantage of rewards programs.
Some of the ways to deal with bad financial decisions include: Restarting life when you’re a financial mess, learning from your financial mistakes, forgiving yourself, using your mistake as motivation, tightening your expenses, refusing to take on any more debt, preparing for the future.
The worst financial mistakes young people make are; Not Saving Enough, racking up consumer debt, overspending in their twenties, not investing enough.
There are four main financial decisions: Capital Budgeting or Long term Investment decision (Application of funds), Capital Structure or Financing decision (Procurement of funds), Dividend decision (Distribution of funds), Working Capital Management Decision
Conclusion
People make many financial mistakes that they wouldn’t have made if they put in some effort to understand money and acquire financial knowledge.
We have taken time to take you through the financial problems that people encounter, some of the worst financial decisions that people have made, the most common mistake in managing money, the financial mistakes you should refrain from, and the biggest financial mistakes people make in 2023.
If you can diligently follow through with all we have made known here, we are sure you will live above the biggest financial mistakes people are prone to making in 2023. Cheers!
References
- investopedia.com – Top 10 Most Common Financial Mistakes
- savethestudent.com – 13 Common Money Mistakes To Avoid
- moneycrashers.com – 4 Worst Financial Mistakes Young People Regret & How to Avoid Them
- goodhousekeeping.com – 9 of the Worst Financial Decisions You Can Make
- cfinancialfreedom.com – How to Fix the 9 Most Common Financial Problems Your Family is Facing
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