Personal finance is a tricky area, especially because it calls for sound financial literacy that not everybody is lucky to have. There are certain common mistakes that people make that set them up for huge pitfalls. These include:
Underestimating insurance needs
Insurance is your best protection against the uncertainty of the future. It is highly imperative that you value your savings and decide how much insurance you will need.
Not saving enough: Unfortunately, a lot of people are spending more than they earn, meaning that they are actually left with nothing to save.
Not paying mortgage in time
Always strive to pay your mortgage on time. And because you may not always have available cash to pay for the mortgage every month, you should set aside an emergency fund earlier on to see you through such months.
Carrying a balance on your credit cards
This is a very common mistake that people make. If you make this mistake, it means you are paying high interest charges on your credit card, and this means you are paying more than you have to for the things you are buying.
Lending money to people, or cosigning on a loan
Yes, it is a great thing to be helpful and a friend indeed, but have you thought about what will happen when the person you assist in getting the funds they need refuse to honor their obligations? You will be stuck in the middle of financial debt and you will not like it.
Going without a budget
This is a grave mistake to make, no matter how much money you earn. A budget is a road map towards financial success. If you can keep tabs on all your money, then you are one step ahead towards achieving financial stability. Do not go without a budget-it helps you decide what you are allowed to spend on, and what needs to wait.
Not reading your retirement savings account statements
It is not enough to just sign up for a retirement savings plan; you must strive to be aware and appraised of what is going on in your account. You must know whether your money is working for you, and whether you will have enough funds for your retirement. The only way you will know whether the retirement package you chose is working for you is by keeping a close eye on your account and reading those account statements.
Not paying attention to your credit score
You may not consider it very important, but a good credit score may open certain doors, while a bad credit score will keep them closed. For instance, a good credit score may enable you to get better interest rates while a bad credit score will even deny you access to certain loans when you need them.