23rd July 2008"I have been working for so long and yet i have very little cash in my savings. I wonder where all of my money have gone to".
Does the statement ring any bells? If you ask around, you are sure to find at least one person you know who share the same thought as the above statement.
If you are thinking of improving your financial health, then you need to be able to recognise your financial mistakes so that you can learn not to repeat them.
Here are some commonly made money mistakes that everyone should avoid:
Mistake #1: Failing to Plan
If i would say that many of you still haven't plan your finances path, would you agree with me? The most common response that we can expect would be the classic excuse " We are just to busy with work and family that we hardly have any time left to do the planning.". As a result, most of us end up paying higher taxes, leaving our saving sitting silently in lousy investments for years or overpaying for financial products. Since there are always deadlines to be met at work, we tend to leave our finances run its own course, thinking that it is of lower priority as there are no deadlines to meet nor is there anyone to force us to look into our financial plans, unless of course we run into serious money problem.
However the important point to note here is that planning is typically found to be a strong habit among people who have successfully accumulated wealth, even with just a modest income.
Mistake #2: Spending Beyond Our Means
Nowdays, we constantly overspend due to peer pressure and consumer temptation that surround us on the daily basis. We are, to a certain extent, expose to mild brainwashing with the TV commercials, newspaper ads, sale circular, and flashy shopping malls promoting the lifestyles adopted by the rich and famous, which of course involves having the latest mobile phones, the latest luxurious cars and latest fashion trend. All these temp us into spending exorbitantly and unnecessarily .
The signals that we get from not jumping onto the bandwagon is that we will be considered left out of today's scene. However, in order to do so, far too often then not, we end up spending way beyond our means. We will find that at the end of each month, the net salaries that go into our bank account are usually meagre, after servicing our car loans, housing loans, credit card bills and other utility bills not to mention parent allowances.
Mistake #3: Spending Future Money
Buy now and pay later! This has become a norm nowadays and the credit card has become a must-have item in our wallet. In fact, a lot of us carry more then one in our wallet. No doubt it is a convenient item to have around, but, to some of us, misusing it is like a play game to us all. It has become a common phenomenon where, just by settling the minimum payment at the end of the month, you would be happy that you have paid the bill already. As a result, the credit card bad debt snow balls to an extent beyond our control. According to the bankruptcy report, the precentage of people declared bankrupt has increase in the last few years especially among the younger age group. Be wise when using credit card. Track each and every items bought using that card and from there you would know how much you have used instead of spending blindly and regreted it at the end of the month. Making minimum monthly payment on the credit card debt allows you to buy more now, but will cost you dearly in the future.
Mistake #4: Delaying Saving for Retirement
Most of us aim to take up early retirement. In order to achieve this, we need to plan our finances to make sure that we have enough savings to sustain the lifestyle that we desire even after retirement. However, many of us find that even when we approached retirement age, we still struggle to meet the savings target that we have set earlier. As our income grows, our saving are suppose to increase as wel. Instead, we spend more on other stuffs like housing upgrade, new car purchases and club membership to keep up with our peers that prevent us from depositing more into our savings.
Mistake #5: Investing in the Wrong Products
There are various kind of financial products in the market. In order for us to find out the right product suits our risk and return profile, we need to equip ourselves with some basic investment knowledge and do the homework ourselves. Instead, most of us end up investing in some products, simply because we rely too much on financial advisors, who might have the agenda of pushing higher sales for their products and therefore provide misleading information to us. It is always important to study the product characteristics or the management team track record before investing. Remember that financial advisors is just another advisor who gives advice but you are the one who is going to make the last decision. So, make it wisely.
Mistake #6: Not Saving for Rainy Day
Some of us think that purchasing insurance is a waste of money. However, we are vulnarable if we and our family do not have insurance to cater for any loss of income. In the event of some unfortunate incident, especially those affecting the family's bread winner, without any cash reserve or insurances, it will be devastating to the whole family. By then, it would be too late to start thinking of income replacement.
Mistake #7: Focusing Too Much on Money Matters
All the above tell us to focus on our finances but at the other extreme, we must also not be too engrossed in accumulating out wealth to the extent that we lose sight of other priorities in our lives. While we plan our financial health, we must not neglect our own health, family and friends,career satisfaction and fulfilling our interest. Without these, even with tons of money, we will not be happy.
Lastly, we need to remind ourselves of the importance of planning our finances. If we are not fully, totally and truly committed to creating wealth, chances are wealth will remain estranged to us. Pls take note on this.
Source: StraitsTime
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