Today, we live in a culture of consumption. Personal and business finances are things that we must carefully take care of and make short- and long-term plans in order to have our financial future secured. Besides our own ways with money, there are external factors that can put you in serious trouble; factors that you cannot predict or affect in any way, such as economic recession and credit crisis. Your financial situation can be understood as a combination or a sum of all financial decisions that you have made up to this point in the present. Most people learn how to handle their finances as they go, but without knowledge or planning, people fall flat in spite of their good intentions. These are some of the most common big financial mistakes you can make, and by preventing them from happening could be the key to your survival and financial security.
No Budget and No Plan
This is what most people find boring to do, as they think “I’m ok right now, don’t go into debt, everything will be all right”. However, in order to know where you are going, you need to know where you are. This requires a bit of financial planning, and 2 hours a week is enough for it. Instead of spending your free time in front of the computer or TV, take care of your budgeting.
Paying Off Debt With Savings
It is very hard to pay back the retirement funds after you withdraw them. You thought that if the retirement account is making 4%, while the debt is costing 18%, you will be able to pocket the difference by swapping the retirement for the debt. It is doable, but rebuilding these accounts can be a tough job even for the most disciplined planners. The urgency to pay it back usually goes away when the debt gets paid off, and people sometimes find it tempting to continue at the same pace. By doing this, you risk going into debt again, but this time without your retirement savings. So, building an emergency fund is also a necessary and viable option.
Having your money work for you is a fine way of making additional income. You can earn like this through various income-producing investments or in the markets. This money can be used as a monthly contribution to your retirement and emergency accounts that will allow you to retire comfortably. People usually do not invest because they don’t understand the markets and find them too risky, or have a hard time trusting others. Do your research on those markets you find interesting and fruitful to invest in, understand how much risk you can tolerate, and understand the time they will have to grow. Consult a financial advisor who will match this with your goals and plans.
Marriages start with lots of hopes and dreams, but things do not always work out. Of course, the reasons for getting apart are emotional, but one should take care some parts of the divorce, such as finance, as rationally as possible. The divorce process may take a while, and you will have large and unplanned expenses – legal fees, court costs, new living expenses, and child support. Your personal assets are to be divided, as well as the family business, but know that divorce laws are executed differently in different states. For example, according to divorce laws in California and its Community Property states, each spouse is entitled to half of all marital assets. In order to make safe, be prepared for the worst and accumulate the necessary funds.
For many people, it takes a lifetime to build some significant wealth. Financial pitfalls are a result of making bad decisions or executing good decisions poorly. It can make things impossible to recover, so start tracking your income and outcome, plan for potential problems, make more and spend less.