I’m sure none of us are a stranger when it comes to finding yourself in money problems. We’ve all been there before and some of us walk away less scathed than others afterwards.
Often when we find ourselves in financial difficulties it is usually due to 2 main problems.
1. Lack of financial knowledge
2. Lack of self-control
Whichever category you find yourself falling into there is always a way out as long as you are willing to work hard at it. Paying off debt will always be a hard thing to do but systems like debt avalanche can help with that.
Today we will look at a few money pitfalls that people generally tend to fall into so that we can avoid them hopefully before they happen to us.
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7 Money pitfalls to avoid
1. Buying Too Much House
Buying a house that you really can’t afford can be tempting.
You think that if you could only stretch yourself just that little bit more that you would be able to get a bigger better house. The reasoning seems almost justified but is it really?
How often do we take into consideration market fluctuations or things that could change for us financially?
Fair enough we can never predict the future but that does not mean that we shouldn’t consider it.
You must always leave yourself with enough financial wiggle room in case things were to ever get financially tight for you.
Also, you can consider your house as an investment. Just because you may not be able to afford the house of your dreams right now you can always start with something more affordable and sell it in the future when you need more space.
This way you can use to profit you have made to actually afford your dream house in the future.
Wouldn’t it be nice to live in your dream house without any financial pressure?
2. Thinking That You Can’t Afford To Save
This is one money pitfall that most of us will fall into at some point in our lives.
It’s really important to make saving a habit rather than an option.
Sometimes we think that we will start saving later because in a few years time we should be earning more and therefore have more capacity to put more money away.
While in theory, this sounds sensible it really is not for 2 reasons.
Firstly if you haven’t already built a habit of saving money it can be difficult to just start but not only this the more money we tend to earn the more our lifestyles grow as well.
Secondly, you can’t guarantee that you will, in fact, have more to save because life happens. You start having children and all sorts of costs start to pop up.
It’s a very wise decision to start saving now as a way of habit no matter how little you have to start with. It’s more about the action rather than the amount at this stage.
3. Buying A Brand New Car
I’ve seen it time and time again, people thinking that buying a car brand new is a sensible option because then they won’t have to deal with any car problems for a few years.
Again, there is some logic in this thinking but there are still deals to be had by buying a car second hand.
If you get yourself a very good mechanic they can usually pick you up a bargain car for a fraction of the price for a new one.
You must also consider that when you buy a new car the moment you drive it off the court that car automatically loses 20% of its value.
How about looking for cars that are almost new and the previous owner has already lost that 20% on the vehicle?
It does happen. People buy new cars realise they can’t actually afford them and have to sell.
There are always deals to be had if you are willing to do the work to find them.
4. Living In Your Overdraft
I have to put my own hands up to this one.
Without me being conscious of it we began living off our overdraft facility.
I didn’t really see it as a problem at first because anytime we got money it would go into our bank account and the overdraft would be “covered”. Well, that was until of course, we went back into it a few days later.
As time went on I realised that we were leaning on it more and more and essentially getting ourselves into debt causing a lot of money problems.
You start to see the money as your own and it becomes easy to spend.
Its a trap don’t do it.
Overdrafts usually carry high-interest rates especially if they are not arranged.
5. Spending Money According To Feelings
I don’t think there are many people out there that can hand on heart say that they have never done emotional spending before.
When we spend money on the things we like it has a way of making us feel better.
It’s easy to have a bad day and want to treat yourself but you need to be careful because it is an easy habit to develop.
It’s a good idea to look at other self-care activities that are cheap or free to help you reset if you have had a bad day.
6. Not Thinking About The Future
This is a big one.
The future can seem so far away sometimes. One moment you are 16 the next you turn 39 and you have no financial plan in place.
It can be a scary position to be in but its never too late or too early to start making plans to secure your financial future.
Think about how you want to put money aside for future including retirement because one day you will retire and it’s up to you when that will happen.
Do you want to be able to retire in your 50’s or your 70’s?
Its a question you need to seriously consider.
7. Not Having A Budget
If you fail to plan, you plan to fail. It’s as simple as that.
Having a budget allows you to have better control over your money and what it does.
Money should always be planned for and never just used.
You should know exactly where every penny of your money is going each month.
Budgeting should not be an option it should be essential to you planning your money.
If you don’t already have a budget in place you can get a free copy of my budget planner here.
Final Thoughts On Money Problems
These money problems are common amongst many people but the good news is that they are fairly easy to avoid.
With the right strategies in place, you can keep all that extra cash in your pocket and use it where it counts.