10 Fatal Mistakes in Managing Money You Should Avoid
Managing money is one of the important skills that everyone should have.
However, not everyone is able to manage money properly and wisely.
Many people make fatal mistakes in managing money that have a negative impact on their finances.
Here are 10 fatal mistakes in managing money that you should avoid:
1. Don't have a budget.
A budget is a plan for your spending and income for a certain period. By having a budget, you can see how much money you have, how much money you need, and how much money you are saving.
Without a budget, you will have a hard time controlling your cash flow and run the risk of spending more than you have.
2. Don't have emergency savings.
Emergency savings are money set aside for emergency situations, such as an accident, illness, or job loss. Emergency savings should be equivalent to 3-6 months of your expenses.
By having emergency savings, you can weather a financial crisis without going into debt or selling your assets.
3. Do not have a financial goal.
Financial goals are a description of what you want to achieve with your money in the short, medium and long term.
For example, you want to buy a house, a car or a child's education. By having financial goals, you can plan your strategy and allocate your money optimally.
4. Not investing.
Investing is a way to grow your money by buying assets that provide returns in the future. Investments can be stocks, bonds, property or businesses.
By investing, you can increase the value of your money and reach your financial goals faster.
5. Not paying attention to inflation.
Inflation is an increase in the price of goods and services in general in a certain period. Inflation causes the purchasing power of your money to decrease over time.
If inflation is higher than the return on your investment, then the value of your money will be eroded by inflation.
Therefore, you must pay attention to inflation and choose investments that provide returns above inflation.
6. Do not have insurance.
Insurance is financial protection provided by insurance companies to their customers in the event of certain risks, such as death, accident or critical illness.
By having insurance, you can reduce the financial burden arising from these risks and protect your family.
7. Not paying debts on time.
Debt is a financial obligation that must be paid by the borrower to the lender within a certain time and amount. If it is not paid on time, the debt will generate interest and fines which will make the amount owed even bigger. Debt will also reduce your ability to save and invest.
8. Does not distinguish between needs and wants.
Needs are goods or services that must be met to survive, such as food, clothing, or shelter.
Wants are goods or services that are desired but not necessarily fulfilled in order to survive, such as hobbies, vacations, or luxuries.
In managing money, you must prioritize needs over wants and avoid wastage.
9. Does not record expenses and income.
Keeping track of your expenses and income is a way to track your cash flow in detail and accurately.
By recording your expenses and income, you can find out how much money you are spending and coming in, what are the sources and uses of your money, and where are the gaps or mistakes in your money management.
10. Not learning about finance.
Learning about finance is a way to increase your knowledge and skills in managing money.
By learning about finance, you can understand basic concepts, terms, products, and financial strategies that can help you make sound and wise financial decisions.
