Cover image by Alexander Grey via Unsplash

Financial blunders committed in your youth might lead to long-term difficulties. Great fortunes are sometimes reported to be lost due to unwise spending habits. It’s safe to assume that when it comes to money, we all make mistakes that have a detrimental influence on our financial well-being. Don’t be shocked if you make some of your largest money blunders in your teens and twenties since financial decision-making is a talent that you improve through time. Being excellent with money is certainly an art that anybody, even the faint of heart, can learn.

Here are some of the most typical financial blunders and the lessons learned from them:

1. Frivolous spending: One dollar at a time, great sums are sometimes lost. If you spend a few extra bucks per week on ordering meals or buying clothes you don’t need, it may not seem like a huge concern; but, multiply this amount by 52, and you’ll discover how much money you’re squandering each year. You can build a rainy-day fund for yourself if you save even half of this and put it in your savings account.

2. Not planning budget: Failure to create a budget is a typical financial blunder. Your financial plan serves as a roadmap for achieving your financial objectives. For a good start, meeting with a financial planner is typically suggested. A solid budget ensures that you’re meeting your necessities and staying within your means, as well as allocating cash to your goals, debt reduction, and future investments.

3. Borrow money for living: Even if they have enough money to live on, many individuals have the practice of borrowing money from friends and family for significant needless costs and paying it back later. However, this is not a sensible approach because it may put a strain on your connection with them. While close family members rarely demand interest, distant relatives or acquaintances may. This has a detrimental influence on personal relationships and often leads to conflict.

4. Paying off debt without savings: If you withdraw money from your savings account, you will forfeit compounded interest as well as a penalty for withdrawing money from your FD or retirement fund. Rather than prematurely withdrawing your FD or pulling money from your retirement fund, it is preferable to pay down the loan as and when you have additional cash.

5. Lending money without saving: Having a golden heart is one of the most prevalent financial traps to avoid at all costs. It’s a no-no to lend money to pals, especially when you’re already trying to live frugally. In extreme cases, they may be unable to repay the money they borrowed from you, causing embarrassment or perhaps the end of the relationship. Before giving them a check, be honest about their financial circumstances and offer to help them in other ways.

6. Living paycheck to paycheck: Relying only on your monthly paycheck might be a difficult situation to be in since you will be in a hazardous position if you miss even one paycheck. Loss of a job or changes in the economy may deplete your funds, trapping you in a debt-paying cycle. Many financial experts recommend keeping three months’ worth of spending in a bank account that you can access immediately.

7. No retirement investment: Contributing to designated retirement accounts monthly is critical for a pleasant retirement. The term “retirement” is sometimes confused with “pension,” although collecting a retirement fund is simply one aspect of a comprehensive retirement strategy. A good health insurance policy that can be renewed indefinitely is also a terrific retirement strategy. Make use of tax-advantaged retirement funds and/or your company’s retirement plan.

8. Ignoring credit score: You may save a lot of money on interest rates if you have an excellent credit score. When it comes to things like purchasing a vehicle, a house, or a personal loan, the higher your credit score is, the simpler it is to secure larger loan amounts and even lower interest rates. If there are any inaccuracies in your credit report, you should examine it every six months or so and take accountability by spending prudently.

9. Not having insurance: Taking out insurance on any major purchase, whether it’s a cell phone, a vacation, your automobile, or student contents insurance, is a no-brainer. Paying a small amount each month might prevent you from being financially stranded in the future. When you first start earning money, the first thing you should invest in is medical insurance. For individuals in excellent health, life insurance is generally affordable, and the peace of mind it provides is invaluable.

10. Having unrealistic financial goals: It’s difficult to predict where you’ll be in ten years, but it’s worth contemplating what some of your long-term goals are. Setting financial objectives for yourself to strive toward may be extremely motivating for your job, as well as your mental health and self-esteem. Keep the money for these purposes aside from your emergency fund (if possible) and only use it when absolutely necessary.

11. Paying more tax than necessary: If you don’t know how to read your payslip when you start working, you may not be aware of when you are eligible for a tax refund. If you’re not earning enough to qualify for student loan repayments, be sure they haven’t started yet. If you’ve been placed on the emergency tax code, you’re likely paying more tax than you should and maybe due a refund.

12. Not asking for raise in salary: Another expensive blunder is failing to negotiate your wage before beginning a new job. To earn a raise at work, you must work hard and make sure that you express your desire for a higher wage. If you believe your talents and abilities are undervalued in your current job, don’t be afraid to look for new opportunities. Keep in mind that while changing employment, you have the opportunity to negotiate a higher salary.

13. Spending too much on housing: Owning a home is both a personal achievement and a financial investment. Some people, on the other hand, maybe acquire a larger house or a larger number of dwellings than is required. A larger residence will result in larger loan amounts for your workers, which means more debts as well as more taxes, maintenance, and utility costs. Make sure your home expenditures aren’t jeopardizing your long-term objectives.

14. Unbalanced investment portfolio: Because many of you are likely to be making investments at a young age, all of your money may be placed in just one investment product. This is a dangerous option because the profits from one investment product may not always be high. When you diversify your portfolio, you boost your chances of getting a better return on your investment. When making investments, it is essential to evaluate your financial situation and the amount that can be invested.

15. Unorganized way of saving: Many times, assets are not adequately arranged and, as a result, lose their significance. It is beneficial to inculcate the habit of saving, but it must be done systematically. You may be aware of the significance of allocating each savings account to a certain cause or category. This will assist you to be clear about the reason for saving, and the money you save will be put to good use.