Did you know that several studies have shown a cyclical link between financial worries and mental health problems like anxiety, depression, and substance abuse? Maybe you are not that far gone yet, but you still worry about your financial future from time to time.
The first step you can take in building a more positive financial picture is avoiding some common financial mistakes. It’s easy to do and has a far-reaching impact on personal finances. Keep reading to find out more about these common mistakes.
Allowing Lifestyle Creep
A lot of people tend to use the argument of earning more money to spend more money as well. Don’t let this happen to you. Lifestyle creep (also known as lifestyle drift) means that you splurge more often than necessary, spending all your additional income on stuff, and not saving or investing more as you should.
Paying off the Wrong Debt
Have you chosen to pay extra into your mortgage rather than pay off your credit card debt? That’s another mistake people make with their personal finances. Always pay off your high-interest credit card debt first, then your student loans or car loans, and finally your low-interest mortgage.
Maintaining Unused Subscriptions or Memberships
What’s the point of paying for a magazine subscription monthly or a gym membership yearly, when you are not even using these items to their fullest? It would be a better use of your hard-earned money to put towards building your investment portfolio. You can work out from home or read these magazines at your public library instead.
Choosing the Wrong Financial Institution
The financial institution you choose to host your investment portfolio or your mortgage will matter quite a bit since it could mean a saving of hundreds of dollars or not.
Take the time to find the best financial institution for you, considering your specific needs, and be comfortable with moving from one institution to another, if your needs are not being met properly. Good financial planning begins at home but your financial institution plays a major role in it as well.
Not Paying Yourself First
Your investment portfolio isn’t going to build itself. You will need to put aside a certain percentage of your income monthly to put into your portfolio. This could mean stocks, bonds, real estate investing, or REITs.
Even Small Financial Mistakes Can Magnify over Time
The problem with financial mistakes is that you might not think they matter much over a matter of weeks or months. But, over years, and decades (which is usually the lifespan of someone’s financial history), they can escalate quite a bit.
That’s why it’s crucial you take care of your financial health from the get-go, and avoid the mistakes mentioned above. You could even form a financial club with your friends or relatives, to help each other on this financial journey.
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