Avoid Making These Money Mistakes In 2018.
From time to time, we will all make some financial mistakes. What is more important than making such mistakes, is learning from them. Here are some financial mistakes to avoid this year.
Failure to plan
Financial success rarely happens overnight. The adage if you fail to plan, you plan to fail highlights the importance of having a clearly defined plan or achievable goal in place to work towards. You cant just sit back and expect things to fall into place. Even though you can’t predict the future, you can be better prepared for it, if you plan ahead.
Not having emergency savings
If you fail to set aside some rainy-day funds, you will be forced to resort to debt should you lose your job, fall ill, or have a major unexpected expense. Set up an automatic withdrawal as soon as your salary is credited to start building up your emergency fund. Ideally this should be about six months of expenses.
Delaying your investing
When you are young it is so easy to feel that you have all the time in the world to start investing. Remember that the great advantage of youth is time and you cant get it back. Time is a major ally when it comes to building lasting wealth.
Even if you don’t have much, just get started. When you imbibe the habit of saving and investing you can take advantage of time and your funds will grow benefiting from the magic of compounding interest and earnings. The longer the wait, the greater the cost to you. The best time to start investing for the future is now.
Avoid borrowing on behalf of someone else.
A good friend asks you to help them get a loan from their bank. You then accede to the offer and borrow in your name on their behalf and sign off on the dotted line. Your friend may have very good intentions at the time of borrowing but if they should run into financial difficulty and fail to pay you back, you are liable to pay the loan back in full. Be very careful in considering such a request if you are approached.
Not paying back money that you owe
This might be a small personal loan from a relative or friend or a large financial loan from an institution. If you have the habit of not paying borrowed funds back on time or even at all, it will all come back to haunt you, as no one will want to lend you money even if its just to tide you over a difficult patch. Your credit score is very important, in your business as well as your personal life. If you are in debt have a plan to pay back what you owe.
Investing in what you don’t understand.
Putting your money in investment vehicles that you do not understand can have devastating consequences. Invest only in what you understand and try to make financial decisions based on adequate research and advice from experienced and tested professionals.
Even if you were one of the thousands of people that got burnt during the stock market crash, it is a big mistake to ignore it completely. There is no best time to invest; invest regularly. You might consider buying into a mutual fund; this way your portfolio would be professionally managed and diversified which reduces risk. Always consider your risk appetite, your time horizon, and your goals before investing.
Not having adequate insurance in place
This can have devastating effect on your finances when there is a mishap such as flood damage or fire. Yet the simple payment of the annual premium could help one avoid this.
Accidents do happen.
Nobody wants to be left paying expensive hospital bills or witnessing a family unable to make ends meet because of the sudden death of its primary breadwinner. Make sure your health insurance is up to date and that you have adequate life insurance particularly if you are the primary bread-winner of a young family.
Buying an asset that you cannot afford.
Remember that by borrowing to buy a car, you are paying interest on an asset that starts to lose value from the moment you drive out of the car showroom. If you must borrow to buy a car, consider buying one that is fuel-efficient and with reasonable maintenance costs that you can afford.
Likewise avoid buying a house that you cannot afford; It is great to have a sprawling expensive house. Instead, identify a property that is less than what the bank says you can afford. That way your payments will be manageable, and you can continue to build your savings and financial security.
Not having an estate plan.
If you have dependents and particular minor children, you ought to have a vehicle in place that can support them in the event of your demise. In your will you can name a guardian for minor children. Why leave it to the state to decide.
If you are regularly spending more than you earn, the prospects for future financial security are dire. Create a budget and stick to it. Don’t look over your shoulder to see what everyone else seems to be doing. Focus on your own goals. There is no magic formula for creating and sustaining wealth. It comes from careful planning, focus and discipline over time.
Nimi Akinkugbe has extensive experience in private wealth management. She seeks to empower people regarding their finances and offers frank, practical insights to create a greater awareness and understanding of personal finance.