Money making ideas are delicate and there is little room for miscalculations. One of the most common place mistakes in personal finance is budgeting for the short term. Research trends indicate that making an annual budget is a wise decision over a monthly one. One of the aspects behind this trend is that annual budgets leave more room for unexpected expenses.
A recent survey done by the Bureau of Labor Statistics on college students indicates that they tend to underestimate monthly expenses by 40 percent whereas annual expenses had a 3 percent margin of error.
A related mistake that people commit is related to skimping on career investments. Many never think about it while others ignore it on the account that it is a cost effective affair. However, investing in your personal development means that you’re giving yourself a chance to get promoted. This means a large monthly income that can cover your career investment.
There is also a general tendency to miss out on reward credit cards. There are certain services like NerdWallet’s list of low interest credit cards and other similar offerings that can strengthen your spending/saving cycle.
Never underestimate the power to negotiate prices. Prices are flexible because everyone is in competition. So you can act as the smart customer and benefit from good savings. This application is related to management of finance, which is very important. It also has relevance when you’re traveling abroad since you may have a tendency to spend more.
Another mistake is that of earning income from only one source. The status quo is such that the average worker can have up to ten different jobs when he/she is in the age bracket before 36. This application is similar to that of diversification of assets in investment. Likewise, by working more, your revenue streams become more diverse. If you’re supporting a family, doing so allows you more options when it comes to tuition and college savings plans as well.
Debt management is also a common mistake where people end up taking too much to too little debt. You need to understand that not all debt is bad. It’s more of an investment strategy where you’ve to figure out the odds. Sometimes, it becomes a necessity to manage your day to day finances. The idea is to use debt wisely rather than not to opt for it at all.
People often make the mistake of paying too much attention on the ups and downs of the market. It leads to undue stress which hampers your chances more than anything else. Simply, keep your investments diverse so that you can survive issues like a plunging market.
Counting on your social security is also a mistake you should avoid. The way the status quo is shaping up, young people today would have fund a major chunk of their retirement with self-savings. This is because of the current status of the Social Security Trust. The benefits are expected to shrink to nearly three quarters the existing value.
To cap it all, never underestimate tax bills. Those who’re earning money from side businesses or working freelance may end up owing a lot of money during April audits. Likewise, married couples should be aware of marriage penalty based taxes. Keep a check of your documentation so as to ensure that you’re managing your taxes in time.
If you’re able to avoid these mistakes, your personal finance management would be pretty strong. All the mistakes that have been highlighted are those that are commonly committed by individuals without taking into account the repercussions.