People’s financial behavior is one of their most individual qualities. We all have our habits for how we treat our funds. However, some behavioral aspects are far less advantageous and, over time, can serve as severe obstacles to saving or feeling more financially secure.
Let’s review some of the most common financial mistakes people make. Furthermore, most of them are preventable: the key is recognizing your behavior and applying remedies to adjust them.
Refusing to start an emergency fund
No one enjoys preparing for the worst. Yet, having the funds to recover after a crisis (such as a job loss) is a security net people need. By neglecting this, people put themselves in an uncomfortable situation, having to cover costs from their usual budget. In turn, they might struggle to cope, require loans, or miss out on opportunities. So, an emergency or rainy-day fund is crucial regardless of your assumption whether a setback is possible.
How to solve this: Start saving a comfortable amount each month and transfer it to a separate account. It’s important to emphasize that the amount set aside should not affect you significantly but be sufficient to allow you to accumulate more funds.
Skipping life insurance
If an emergency fund is uncomfortable, life insurance can be an even more sensitive topic. Again, investing in life insurance provides stability for you and your family, helping them get back on their feet after a tragedy. Most people with no health issues can get relatively affordable life insurance plans. Thus, it’s another motivator for getting around to perform this step.
How to solve this: Contact multiple insurance companies to scope the offers you can get. It’s just about finding the time to do it, and once you do, you can enjoy more peace of mind.
Not analyzing your expenses
Your payment history is like a window into your soul or, more accurately, your daily life. Take a moment to review your most significant expenses over the month (for instance, you’ll discover which categories are costing the most). Of course, you don’t always have much wiggle room (or options to downsize), particularly for loan payments, bills, or essential groceries. However, you can likely discover particular habits that accumulate over the month, such as unnecessary subscription payments.
How to solve this: The crucial part is building more awareness of your finances. Double-check whether you make intentional purchases or are more easily swayed to make accidental or emotion-driven purchases.
Missing out on additional income opportunities
While not exactly a mistake, it’s unfortunate that many people disregard the potential of earning more. For example, skilled professionals should not limit themselves and use their expertise outside their primary job. That could include tutoring, consulting, offering workshops, or creating digital products to sell. The latter can consist of online courses focused on your area of expertise. Furthermore, you can build communities of like-minded individuals via blogs or other platforms.
Besides extending the use of your professional skills, people can explore the options for earning money effortlessly. For instance, you might have some untapped opportunities for income, like renting out garages or parking spots. Even your internet connection can become a source of extra income. The latter means you share your unused internet bandwidth and earn free money for your contributions.
How to solve this: Be more open about starting new ventures or exploring current opportunities online. The chances are that anyone can find a source for a stable income, but it’s essential to manage your expectations. Many activities take time to generate funds; thus, patience is necessary in this case, too.
Ignoring the lifestyle creep phenomenon
Lifestyle creep is interesting as it focuses on situations when people’s needs grow alongside their income. Thus, as one’s monthly earnings increase, so does one’s spending. This commonly leads to overspending, triggered by the feeling of having more money and, hence, more options for buying more.
How to solve this: Don’t let this affect your lifestyle too much, and even after a salary increase, maintain similar expenses despite the temptation to splurge. An example would be taking the time to reconsider before a more significant purchase that might prove unnecessary after some additional contemplation.
Spending too much time online
The internet brings us many wonderful things. However, thanks to social media and its addictive effect, many obstructive financial habits can be reported. For instance, after watching an aesthetic vlog of a person narrating their day, you might feel compelled to buy new kitchen appliances just because you started to feel like you’re missing out.
How to solve this: Try to limit your time on social media or choose accounts that don’t focus on triggering such feelings (or are not constantly promoting products).
Conclusion
Getting your financial behavior in check can take time, especially if you feel like you display most of these habits. However, the first step in finding the solution is recognizing these patterns and catching yourself before you do them. You will be pleased and surprised by the effect that dropping them can have on your well-being and finances!
