When it comes to your personal finances, the simplest mistakes can end up costing you lots. By ensuring that you don’t make these mistakes, you will be far ahead of the general population and likely to be on track for a better financial future. Here are some of the most common money mistakes that people make.

Not having a budget

It is absolutely crucial that you have a personal budget. No matter how much you actually earn, the fundamental principles are the same, so it is vital that you understand how much money you have coming in, how much your expenses are, and how much you can save and invest. By formulating a personal budget, you will be far better off each pay cycle and also in the long term. Doing the simple maths will allow you to calculate what you can afford, and once you have a solid budget, sticking to it will help you get ahead.

Living beyond your means

Everyone is guilty of this at some point. The temptation to buy newer, nicer things is always there and this can be dangerous. Purchasing items that you can’t actually afford is doing your financial future a great disservice. Taking a reality check and being disciplined about what you can and can’t afford is the first step. Don’t let yourself get into debt just to keep up with your neighbours. Instead, understand and come to terms with your situation and spend humbly, so you can save for the future.

Not investing wisely

You may already invest your money, but simply doing this is not enough. Ensuring your investments are appropriate is a big factor and ensuring that your attitudes towards investing are right is extremely important. Many people think of investing as gambling, playing the share market for gains, but investing is a long term process. Wise decisions around quality investments are more effective than trying to play the markets in the hope of short-term returns.

Paying bank fees

Banks are always trying to get away with charging fees on whatever they can. As a customer, you are well within your rights to question fees that turn up on your statement. Sometimes, your bank will be more than willing to refund certain fees. Also importantly, before choosing a product, ensure you understand all of the fees involved and don’t be afraid to negotiate and also shop around for the best deal. There are a number of banks that don’t charge fees on standard accounts or products.

Not having an emergency fund

Sometimes life will throw a curveball and you will be required to have some finances to get through it. Whether this is an illness, injury or perhaps a sudden loss of your job, bills will continue so you need to ensure that you are well placed to cover yourself in the interim. This is where an emergency fund is vital. Ensure that you have an additional savings account where you transfer extra money for safekeeping.

Not having insurance

Whilst not related to your earning potential, insurance is a very important aspect of financial security that is too often overlooked. If something were to happen to you, how would you provide for yourself and your family? Whether it is a life threatening event, or an injury that prevents you from working for a long period, insurance is there to cover you. Having adequate insurance to cover your expenses and debts is paramount, no matter what age bracket or life stage you are in.

Spending for happiness

The psychology of money is a profound issue. Many of us think that purchasing things will help us feel better or happier about our lives. In truth, this feeling does not last and it inevitably results in a cycle of spending that is constantly searching for that next feeling of happiness. This can result in a situation of real financial strife and at best, it will be draining your finances. Instead, you should try and get a handle on these feelings and channel your funds into your financial future.

Not setting goals

As with your career and your life in general, it is important to have specific goals for yourself when it comes to your personal financial situation. Without clear goals about how much you need for your retirement or even shorter-term goals such as your next holiday or the children’s educations, you are less likely to have enough. Goals provide direction, purpose and a way to measure your progress, so it is important to spend the time to articulate them clearly.

It is very easy to make mistakes like this when it comes to money. The good news is that by simply being aware of them, you can take steps to avoid making them and to put yourself on the right financial trajectory. Be sensible, wise and disciplined with your money and you will find that your financial position will improve.

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