4 Common Financial Mistakes to Avoid!

4 Common Financial Mistakes to Avoid!

We have all made financial mistakes from buying a new pair of shoes knowing that isn’t in our monthly budget, to running up our credit cards only to suffer when the bill comes. However, if you understand common financial mistakes, you can learn to avoid them. 

1. Excessive Spending

To avoid excessive spending prepare a budget. A budget is a plan for how you spend your money each month based on your earnings and expenses. To create a budget write down your income and all your expenses and subtract the expenses from the income, this determines your disposable income. Create a monthly budget and decide what you will spend your disposable income. Be sure to track your spending to ensure you stick to your budget. 

2. Awareness of Credit Rating or Debt Service Ratio score

Many of us are not aware of our DSR or Debt Service Ratio, our expenses as a percentage of our Income.  A  DSR above 40 -50% is considered negative.  A high DSR can mean the difference between affording that new car and continuing to drive around in your brother’s old one. Financial institutions check your debt service ratio to ensure that you pay your debts on time. Check your DSR every six months. If your DSR is too high, make amends by spending less and paying your bills on time.

3. Borrowing Money 

Many people are in the habit of borrowing money from friends and relatives. This can negatively affect personal relationships and cause conflict when the borrower does not repay as expected. Do not adopt this practice! Instead, seek advice from your financial institution to help reduce your debts. 

4. Paying full price 

Compare prices carefully before purchasing, you can even purchase used items to cut cost. Many persons may scoff at purchasing used items, but consider this, by the time you get that new table home from the furniture store it is sure to have picked up a few dings and nicks along the way. Let’s be honest who would know the difference between brand new and gently used except for you.

Take the time to include these financial tips into your financial plan and you will set yourself on the road to financial success.

 



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