Home Finance : Common Mistakes
As your family multiplies, you need to start thinking about your financial sitaution a bit more seriously than before. While spending money was not considered a problem before, with the arrival of a kid in the house, you need to make new plans and make necessary amendments to the already existing ones to accommodate newer expenses.
Most if not all individuals make mistakes even if they plan out their finances properly. While most of these mistakes are negligible and can be corrected with due course of time, there are some really hard to correct mistakes that can become huge burdens if not taken care of properly. Here are a few of them.
Most of us crave luxurious if not extravagant lifestyles. And so it happens that it is very hard to find a household that does not have a car or a home theater system these days. The problem with this is that most of these amenities would have been purchased via loans.
Most of the time, it’s newly weds who feel the urge to settle in life quickly. Thus, they resort to loans and debts to fufill their current requirements and opt to pay for the same later.
A few small debts are ok. however, too many depts or huge loans can become burdensome with time and can become real financial crunchers. It is best advised to stick to a maximum of two to three loans and opt to avail the rest later on when either one or two of the existing loans have been paid off.
The term ‘budget’ becomes synonomous with each and every aspect of a family’s lifestyle. A common mistake many individuals make is to course through the month without a budget in the hope of saving up whatever money is left at the end.
The problem? They don’t have any money left by the time they reach the last few days of the month. Worse yet, they run out of money in the middle itself and resort to borrowing money from friends and family members which in turn increases debts.
The best way to make sure that you have some money left in your hands at the end of the month is to make a budget and follow it strictly. Add whatever expenses you feel are completely necessary for that month to the top of the list. These would include general expenses, loans and debts. Expenses you feel are not so important can either be pushed to the bottom of the list or can be set aside for the next month.
If you belong to the lower or upper middle class family group, you would probably understand the need for a good retirement plan to keep you financially stable after you stop working.
Many individuals tend to keep on pushing the thought of saving for retirement to the back of their minds while focusing on the more recent goals. A point to be noted here is that the farther away you push your retirement plans, the more you have to pay then for a hassle free life after retirement.
According to research, it has been found out that a person who is in his 20′s needs to set aside just 10% of his income for retirement, a person in his 30′s needs to set aside at least 30% of his income for a decent retirement plan.
The best way to combat this issue would be to choose a good retirement plan early on in your life and start contributing to the same to enjoy a safe and comfortable retired life.
With school and university fees reaching the roof, parents need to start saving for their children’s educational expenses from day 1. Setting aside some money every month for your little one’s education will be extremely beneficial for you in the long run.
However, when it comes to prioritizing your expenses, education and its related expenses can take a back seat. For example, if you have outstanding loans, debts and policies that you need to pay off, you can move the idea of saving up for your kid’s education to a later date or period.
It is recommended to save some money for emergency purposes. What if you lose your job all of a sudden? What if a family member gets hospitalized suddenly? Taking these situations into consideration, it becomes necessary to save some money every month and keep it aside for unforseen emergencies.
Though this might be impossible in today’s fast paced world, there’s always the option of keeping aside a separate account and depositing money in it every month. It does not need to be a fixed amount every month.
You can put in as much money as you want to in the account. However, you need to refrain from tapping into it for other not so urgent needs like buying a television, going shopping or holidaying.
