Do you currently find yourself living from paycheck to paycheck, never really knowing where your hard-earned money goes in between pay days? It’s time to assess the way your spend your money and handle your finances.
Lianne Laroya, finance blogger of The Wise Living, and author of “OMG! Where Did Your Sweldo Go?” zeroes in on some money mistakes that keep you broke.
1. Instant gratification
You’re walking in the mall and you immediately notice something that catches your eye. All of a sudden, excitement takes hold of you, and you feel the need to have a pair of those one-of-a-kind boots now! When you need to give your wallet a break, just walk away. More often than not, emotion-led purchases are impulsive and that fluttery feeling of buying something fades fast.
Read more: 8 Money-Smart Tips for the Frugal Female
2. Not knowing where your money goes
Knowing exactly how much you earn and spend every month gives your power over your money. Great personal finance apps like Wally or Spending can help you keep track of your daily, weekly, and monthly expenses and even categorize these items in order for you to see which expenses you need to hold back on.
3. Small fees, penalties, late fines
Fees from paying bills late or using ATMs from different banks can go up to Php 400 to Php 500 every month. That’s just money down the drain. If you can’t help but withdraw from an ATM of a bank where you’re not an account holder, it may be best to withdraw a large sum, keep the money locked in a safe place, and only take the amount you’ll need in a day according to your daily budget. Remember, even “small” fines add up.
4. Scams and taking part in suspicious financial schemes
If something seems too good to be true, it usually is. In many cases, the best financial security is to exercise caution. Don’t believe in a person who says you can earn millions in just a few months. That is not possible unless you win the lottery. Because people are desperate to make a quick buck without much toil, there is a rise in the number of pyramid scheme victims. When it comes to entrusting your money to another person or with an organization, make sure that the company is legitimate, well-established, and trusted.
Read more: 8 Hobbies That Can Earn You Money
5. Financial illiteracy
Don’t be open-minded about “get-rich-fast” schemes. Aside from exercising proper caution and diligence, make sure to do your own financial research or ask help from an entrusted financial adviser. Being well-versed on financial planning, investments, and other money matters is an added security measure against scams.
6. Quantity over quality
When it comes to items you use on a daily basis, it’s best to stick with the “quality over quantity” principle. One durable, long-lasting bag is better than ten bags that become damaged after only a few months. Also, it’s good to stick to stylish basics that are timeless, instead of going for flashy trends that could easily get dated in a matter of months.
This principle is of course not only applicable to fashion, but also to household items, furniture, office supplies, etc. You’ll save more bucks if you invest in things that you know are durable and would last for a really long time.
Read more: Curate Your Own Wardrobe: 4 Basic Closet Must-Haves for Every Woman
7. Not sticking to a budget
When it comes to mapping out a budget, people usually use the 70-20-10 division. 70% of your earnings go to fixed expenses and emergency fund, 20% to your savings and investment account, and 10% in giving back to your community. However Lianne proposes her SELFIE Budget Plan:
Security (15%): emergency and retirement fund
Education (5%): investing in your knowledge and learning new skills
Livelihood (10%): for your business, if you have any
Fixed Expenses and Priority Expenses (55%): monthly bills
Insurance (5%): health and life insurance
Enjoyment (10%): for spoiling yourself!
You could also tweak the amounts and percentages according to your needs and priorities.
8. Lack of discipline
Sometimes, it’s really not that complicated–it all just boils down to discipline. You have to know which expenses are necessary and justified, control your cravings and impulse shopping sprees, and make saving your top priority. Take control of your cash flow and your spending. Your lifestyle should not be dictated merely by how much money you have.
Read more: 5 Habits of Money-Smart People
Stick to your goals and be stick to your boject. Financial stability is a long process that requires tenacious self-discipline, but it is definitely worth it in the long run.
Featured image from Mad Money courtesy of Millenium Films