Guest Post: 7 common financial mistakes how to avoid them

Are you satisfied with your savings and investments? Or do you think you can do better? It’s a good sign if you have such doubts – by Naina Rajgopalan

 
Making financial mistakes that hold you back from saving money at your full potential is not uncommon. It’s better to keep a check on your financial wisdom and habits. And get some good money tips from wherever possible. 

So how to recognise these mistakes to avoid personal financial problems and save money in a better way? Keep reading to find out the answer! 

7 Common Financial Mistakes to Avoid

 
Check out this list of 7 common financial mistakes that people make. Are you also guilty of any of them? The ways to rectify each error are also mentioned here so you can get back on track. 
 

1. Not Planning for Retirement

 
So you get a pension and probably a good fund when you retire! Do you think it will be enough for you to sustain your lifestyle at old age? Not planning for retirement is one of the biggest financial mistakes. 

Retirement planning is more crucial for business owners as they don’t even get any pension. Put some money aside every month for your retirement. You would need better healthcare and facilities in old age. 

2. Saving Without Any Plan or Goal

 
Did you calculate your monthly budget and financial goal before deciding the amount you want to save every month and the appropriate savings scheme? A saving plan is vital before marching on your journey to financial freedom. 

Otherwise, you may not reach your financial goal despite saving every single month. People who save and invest blindly based on someone’s advice regret it later. So plan and strategies your finances appropriately. 
 

3. Underestimating Investing in Insurance

 
As you and your family members get old, your risk of getting sick and the amount of your insurance premium increases. Therefore it would be wise to get health and life insurance for yourself and your family. Also, ensure your vehicle and other possessions which are costly to repair. 

A one-time hospitalisation or visit to a garage can cost you money equivalent to your budget of a few months. Thus, going on with no insurance may invite grave personal financial problems. 
 

4. Saving Too Much Money

 
When it comes to savings and investment, radical approaches and unrealistic goals are a recipe for failure. The ideal percentage of saving and investment from your total income is 10-20%. Saving less than that will not be fruitful. 

Similarly, saving too much money is also counterproductive. It will disturb your monthly budget. You may be unable to sustain this strategy of saving excessive money in the long term and stop saving altogether. 
 

5. Giving into Pressure or Fear

 
A certain urge to save for the future is healthy until it compels you to take a well-planned step. However, if it turns into fear of the future, you may commit a financial mistake in desperation. Take a calculative decision with a calm mind regarding how much and in which scheme you want to invest. 

Also, never buy a car, house, get married or start a family due to social comparisons and pressures. Make such critical decisions only when you can afford them. 
 

6. Not Maintaining an Emergency Fund

 
Pandemics and recessions showed us time and again that financial crises often don’t give us any notification. So you must have an emergency fund kept aside. It must be equivalent to sustaining your expenses for 3-6 months in case of unforeseen personal financial problems. 

One of the most valuable money tips is to save some money for a financial emergency every month. And don’t lead an expensive lifestyle which compels you to live paycheck to paycheck. 
 

7. Buying Everything on Credit

 
Yes! A credit card is convenient. But using a credit card to buy essentials and groceries is a risk. If you miss the due date for the minimum payment, you may end up paying double-digit interest on the price of these items. 

It will be financially wise to pay interest on items you can easily afford! Also, using too many credit cards can lead you to spend more than you earn. 

Remember, the whole exercise of saving money is to live a dignified and financially independent life. So don’t commit financial mistakes like saving too much money or stressing too much about the future that you don’t enjoy the present moments. After all, we all live once only. So do strategic planning, take necessary insurance, and maintain an emergency fund, but don’t forget to enjoy life! 
 
Author Bio: Naina Rajgopalan has a thing for numbers and a deep fascination to learn about all things finance. Money-wise from a young age, she has always shared her knowledge and tips with those around her and is part of the content team at neobank, Freo Save. Naina engages readers across all walks of life to help them manage their finances and budgets better, so they can make better decisions while spending, borrowing, investing and saving