Connect with us

10 Common Personal Finance Mistakes



Personal Finance MistakesFinancial problems, like many medical problems, are best detected early (clean living doesn’t hurt, either). Here are the common personal financial problems I’ve seen in my Personal Life, and how to avoid them. Enjoy!



Personal Finance Mistake#1. Not Planning

Human beings were born to procrastinate. That’s why we have deadlines (like April 15) — and deadline extensions (need another six months to get that tax return done?). Unfortunately, you may have no explicit deadlines with your personal finances. You can allow your credit card debt to accumulate, or you can leave your savings sitting in lousy investments for years. You can pay higher taxes, leave gaps in your retirement and insurance coverage, and overpay for financial products. Of course, planning your finances isn’t as much fun as planning a vacation, but doing the former can help you take more of the latter.


Personal Finance Mistake#2. Overspending

Simple arithmetic helps you determine that savings is the difference between what you earn and what you spend (assuming that you’re not spending more than you’re earning!). To increase your savings, you either have to work more, increase your earning power through education or job advancement, get to know a wealthy family who wants to leave its fortune to you, or spend less. For most people, especially over the short-term, the thrifty approach is the key to building savings and wealth.


Personal Finance Mistake#3. Buying With Consumer Credit

Even with the benefit of today’s lower interest rates, carrying a balance month-to-month on your credit card or buying a car on credit means that even more of your future earnings are going to be earmarked for debt repayment. Buying on credit encourages you to spend more than you can really afford.


Personal Finance Mistake#4. Delaying Saving For Retirement

Most people say that they want to retire by their mid-60s or sooner. But in order to accomplish this goal, most people need to save a reasonable chunk (around 10 percent) of their incomes starting sooner rather than later. The longer you wait to start saving for retirement, the harder reaching your goal will be. And you’ll pay much more in taxes to boot if you don’t take advantage of the tax benefits of investing through particular retirement accounts.


Personal Finance Mistake#5. Falling Prey To Financial Sales Pitches

Great deals that can’t wait for a little reflection or a second opinion are often disasters waiting to happen. A sucker may be born every minute, but a slick salesperson is pitching something every second! Steer clear of people who pressure you to make decisions, promise you high investment returns, and lack the proper training and experience to help you.

Personal Finance Mistake#6. Not Doing Your Financial Homework

To get the best deal, shop around, read reviews, and get advice from objective third parties. You also need to check references and track records so that you don’t hire incompetent, self-serving, or fraudulent financial advisors. But with all the different financial products available, making informed financial decisions has become an overwhelming task.


Personal Finance Mistake#7. Making Decisions Based On Emotion

You’re most vulnerable to making the wrong moves financially after a major life change (a job loss or divorce, for example) or when you feel pressure. Maybe your investments plunged in value. Or perhaps a recent divorce has you fearing that you won’t be able to afford to retire when you planned, so you pour thousands of dollars into some newfangled financial product. Take your time and keep your emotions out of the picture.


Personal Finance Mistake#8. Not Separating The Wheat From The Chaff

In any field in which you’re not an expert, you run the danger of following the advice of someone you think is an expert but really isn’t. You are the person who is best able to manage your personal finances. Educate and trust yourself!


Personal Finance Mistake#9. Exposing Yourself To Catastrophic Risk

You’re vulnerable if you and your family don’t have insurance to pay for financially devastating losses. People without a savings reserve and support network can end up homeless. Many people lack sufficient insurance coverage to replace their income. Don’t wait for a tragedy to strike to find out whether you have the right insurance coverage.


Personal Finance Mistake#10. Focusing Too Much On Money

Placing too much emphasis on making and saving money can warp your perspective on what’s important in life. Money is not the first or even second priority in happy people’s lives. Your health, relationships with family and friends, career satisfaction, and fulfilling interests should be more important. Money problems can be fixed over time with changes in your behavior.

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Are you looking for easy accounting tutorial? Established since 2007, hosts more than 1300 articles (still growing), and has helped millions accounting student, teacher, junior accountants and small business owners, worldwide.


Related pages

ifrs impairment of long lived assetscalculate times interest earned ratiocredit sales vs accounts receivablepaid office rent journal entryquickbooks essentialhorizontal analysis is a technique for evaluating financial statement datawrite off accounts receivable journal entrymaterial price variance formulacp2000 response lettercapital employed turnover ratio formulapre operative expenses accounting standardhorizontal analysis accounting exampleaccounting horizontal analysispurchase method of accounting for business combinationswealth maximization goalhow to calculate the salvage valueare bonds payable a current liabilityanalysing financial reportsbudgeting in cost accountingmaterial misstatement auditaccounts aptitude questions and answerseffective tax rate reconciliation exampleexplain the concept of responsibility accountingifrs income statement templateearnings capitalization modeltax audit vs statutory auditreorder point calculation exampleconservatism principle accountingcost segregation definitionaccount receivable journal entries adjusting entriescpa mock testdefinition of goodwill in accounting termsroyalty payments accounting treatmentifrs extraordinary itemswherewithal to pay doctrineifrs presentation of financial statementsreceivables collection periodrumus liquidity ratiowhat kind of account is unearned revenuecorporate treasurer dutiessynonym of fictitiousjob order costing methodfixed asset ifrscapital lease calculationbad debts allowance methoddays sales outstanding dsohow to calculate days sales in inventoryconcept of debit and credit in accountingpercentage of completion accounting journal entriesschedule for cost of goods manufactureddefinition of incremental budgetingjournal entry for perpetual inventory systemexamples of internal control weaknessesaudit flowchart symbolspayroll diagramwhat does rop mean in inventorytreatment of deferred tax liability in cash flow statementtorrent myobexamples of current and noncurrent liabilitiesconsideration of fraud in a financial statement auditwrite off deferred tax assetyear end inventory adjustment journal entryanalysing a balance sheetcapitalizing construction coststally adjustment entriesbad debt expense entrieshow to calculate vehicle depreciation for tax purposesunguaranteedwhat is furniture and fittings in accountingcheque receiving formathow to classify fixed assetscoverage ratiosfedex balance sheethorizontal common size analysispaid advertising expense journal entry