Are You Making These Major Money Mistakes?
COL Financial
Expert
Key Points
Having good financial health doesn't just depend on doing the right things—it's also about making sure you don't make mistakes that will be hard to undo. Here are some common money mistakes you should watch out for:
Ever find yourself wondering why your savings account doesn’t look as good as it should? You’re not alone! Many people have a hard time managing their finances, whether it’s because they find it scary, or because it’s too overwhelming and feels too hard to figure out.
In this article, we’ll talk about common money mistakes that could be the reason behind why people are struggling with managing their own money.
Money Mistake #1: You don’t keep track of your money
Do you know how much you save? What about how much you spend?
When you don’t keep track of your money, especially your expenses, it’s easy to lose sight of where your money is going. At best, you’re overlooking good opportunities for how you can grow your money, but at worst, you can easily overspend or even accumulate debt.
Keeping track of your money doesn’t have to be too complicated. It can be as simple as just starting with a bare-bones budget where you allocate your money or income into (a) savings, (b) necessary expenses, and (c) fun funds.
As for tracking expenses, you can go with the many apps available for it if you want to track down each and every expense. You can also opt to just keep track of your largest expense categories–whatever is easier for you so you can develop that habit of knowing where your money goes in general.
Mistake #2: You don’t have any financial goals or plans
Imagine you’re on a road trip with no set destination, and without the help of Google Maps. How do you think this road trip will go? Sure, it might be exciting at the beginning, but you could easily end up getting lost, wasting fuel, and never reaching a great destination.
That’s how your life can feel when you don’t have financial goals or plans. When you go through your financial journey without knowing where you want to go and how to get there, you can end up wasting money on things you don’t really need, or you can end up not making any meaningful financial progress.
Start things off by asking yourself what your life goals and financial goals are. How do you want your life to look like in the next 10, 20, 30 years? What kind of quality of life do you want for yourself when you retire?
Once you can answer this, it’ll help you make smarter decisions with your money because you know what direction you need to go to.
So just like you wouldn’t go off on a road trip without any direction or guide, it’s important for you to have financial goals and plans to guide you through your financial journey.
Mistake #3: You’re not saving and investing
Do you have a YOLO mindset when it comes to money, where you’re mostly focused on how to spend your money today without thinking about the impact of that to your future?
That may be fun today, but you might be building a difficult future for yourself this way.
Saving and investing is a way of setting yourself up for success in the future.
The worst part of not saving is not having money set aside for when things go wrong. Maybe your family car breaks down and you don’t have enough for repairs; or maybe you go through a company lay-off and you don’t have any money to fall back on.
Not investing, on the other hand, isn’t as scary as not saving. However, this is where you miss out on opportunities. If you do have savings but you don’t let your money work for you through investing, it may lose value over time due to inflation. Investing is also a good way to grow what you have, so you can get to your financial destination much sooner.
Mistake #4: You’re investing without a plan
Similar to having financial plans, having an investing plan will help you make the most out of your investing.
If you haven’t created an investment plan yet, just ask yourself the following questions to start:
• What are your financial goals that investing will help you with?
• How much risk and volatility are you willing to take, for the kind of returns you’re looking for?
• How regular can you invest?
• What investment options are available to you that you can easily monitor and manage?
• How long can you keep your money invested? (Tip: the longer, the better!)
Answering these questions can put you on the right track for investing. This way, you can better choose among the many investment options out there, to what is most suited for your financial goals and your risk profile.
Conclusion:
If you’re guilty of these mistakes, don’t worry–most people are as well!
What’s important is that you now know what major money missteps to avoid, and you now know some next steps so you can make your financial journey smoother and less stressful. Good luck!
This article is part of Your Investing Journey - COL's monthly email newsletter that contains insights and strategies by the COL community to help you achieve your financial goals. Click here to read more articles like this.
COL Financial is the country’s most trusted wealth-building partner where more than 400,000 Filipinos invest in stocks and mutual funds. COL was founded on the belief that ’every Filipino deserves to be rich’. That is why, for twenty years now, we remain committed to help Filipinos build wealth by continuously providing free seminars, expert guidance and innovate tools.