Being good at money management is something anyone can learn and master, and it all boils down to having good money habits. However, struggling to achieve financial freedom may be because there are some mistakes you are making with money. These mistakes will keep you from saving and growing wealth.
Here are five common mistakes you are making with money and how to correct them:
1. Failing To Budget
You may think budgeting means you should suffer and that I am asking you to live a suffer-head life. That’s not true! I am simply asking you to have a plan for your money. A budgeting plan for how you will spend your money. So why are you still failing to budget?
There are apps to help you budget, and you can also get my budget and saving book on amazon. You can use a notebook also; divide the pages into two, the left side for your budget and the right side to track your expenses. Now you have no excuse for not budgeting.
2. No Emergency Fund
Another mistake you are making with money is that you have not put aside any money for emergencies. I get a lot of questions about how much should be set aside for emergencies. The answer is that you should save at least 20% of your income monthly until you have built an emergency fund.
An emergency fund should cover at least 6 months of your living expenses. Your emergency fund is how much you need to survive for at least 6 months.
Running into emergencies without an emergency fund would have you running helter-skelter, taking loans, going after payday loans, debts, breaking investments, and all sorts of unhealthy desperate measures.
Without emergency funds, saving won’t be easy, but once you have them, you will enjoy peace of mind.
If you are struggling to build an emergency fund because you don’t have money, you should read this post when I talked about how you can save when you don’t have money.
3. No Debt Repayment Strategy
You are paying off your debt based on who is chasing you the most. You look at which debtor is stressful, or you are simply paying a little bit on everything. It won’t work that way.
It would be best if you had a strategy. You need to know if you are paying the most minor first or going from the most expensive to the least costly. So you must have a debt repayment strategy and stop haphazardly paying your debt.
4. Not Lowering Debt
Many people pay off their debt as it is. But it would help if you reached out to your lender to discuss lowering your debt costs. The conversation should be like, “look, I really want to pay this off, but I am struggling, and I would need you to lower the cost of my debt.”
You’ll be amazed at how much relief you will get. So, please do not assume you can keep paying it off without lowering the debt. Not reducing your debt makes it impossible to pay it off completely.
You would likely keep paying just the interest on the debt every month while the main principle is still there.
5. Not Consolidating Debt
You need to put all your debt together in one place. Many people have their debts scattered in many areas and may forget that others exist.
As a result, they may fail to make payments or even get intimidated by the number of debts hanging around.
So what you need to do is to consolidate your debt into the cheapest platform or basket that you can. That means combining all your debts which might mean taking on new debt with a lower cost and using it to pay off all the other debts with higher costs. Then you are left with the new debt, which will cost you less.
If you’re struggling to save and pay off debt during inflation, watch my tips and hacks on surviving the cost of living crisis here.
Till next time.