How Many of these 11 Money Mistakes are you Making?

Last Updated – Aug 1, 2022 @ 1:15 pm

Growing up, we weren’t given formal teachings about wealth and money. 

School didn’t teach us the most important aspects of how to manage our finances. 

Lacking a good framework, most of us just wing it when we start earning income. 

We missed out on financial opportunities that could have made our lives much better then and now. 

However, it’s not too late. 

To get a better grip of your finances, these are a list of things that you should avoid doing (and what you should do instead).

Not making a budget

• If you find yourself struggling every month to make ends meet, you need to create a budget
• A budget gives you more financial control, helps you track where your money goes, makes you more disciplined, and prevents overspending.

What to do instead:

• List your monthly expenses
• Determine the average monthly cost for each expense
• Adjust your budget accordingly
• Use apps to make budgeting easier

Learn more: How to Budget

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Not saving

• Living paycheck to paycheck makes living uneasy and stressful since you don’t have anything to fall back on
• You’ll be unprepared for any unexpected expense that may arise
• You’ll likely end up with significant debt that you’ll have a hard time paying because your budget’s stretched too thin

What to do instead:

• Start by having a monthly budget
• Optimize your spending to fit your budget
• Look for additional sources of income to make saving easier
• Open a savings account and be consistent with your deposits to build a strong habit of saving

Learn More: How to Save & 100+ Tipid Tips

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Not having an emergency fund

• Not having a safety net for urgent financial needs puts you and your family at very high risk
• You’ll be forced to resort to borrowing which is likely tagged with interest and may not be readily available

What to do instead:

• Track your spending
• Cut back on certain expenses
• Open a savings account and build up to 6 months worth of income

Learn More: How to Build an Emergency Fund

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Not having insurance

• If you’re the family breadwinner, it makes sense to get insured
• It can give you the peace of mind that they will receive monetary benefit in the event of your untimely passing
• Some plans offer hospitalization benefits making it more flexible and usable

What to do instead:

• Check out what’s available out there based on your budget and needs
• Some include benefits for emergencies and hospitalization
• Term insurance for “pure insurance”, whole and variable universal insurance for additional living benefits and investment (VUL)

Learn More: How to Get a Life Insurance

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Not paying your bills on time

• If you make a habit of always falling behind on your payments, it can snowball in a cycle that can be very hard to break
• When you only pay the minimum charges on your credit card bill, you end up paying more due to interest rates and develop bad credit rating

What to do instead:

• Catch up on your late payments
• Set up reminders ahead of due dates, making sure to dedicate a certain time of your day for paying it
• If you’re constantly short on funds, look for alternative ways to boost your income

Learn More: How to Pay Bills Online

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Paying off the wrong debt first

• You will end up paying more and for a longer period of time if you don’t optimize the way you pay your outstanding debts

What to do instead:

• Start tackling your highest interest rate debt, like credit cards, first. Move onto lower rate debt like mortgages. 
• Balance transfer credit cards will give you an introductory period of 0% APR, giving you extra time to pay off your debts.

Learn More: How to Get Out of Debt

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Allowing lifestyle creep

• Lifestyle creep is the tendency of people to spend money on items that were once luxuries but now appear as necessities. Usually due to an increase in income.

What to do instead:

• Increase and automate your savings and investments
• Stick to a sensible monthly budget
• Set up a long term savings and retirement plan

Related: Become a Minimalist

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Not preparing for retirement

• Not having any savings or income-generating assets could mean you won’t have any source of cash flow once you retire
• You’d be forced to rely on family members or relatives for your living expenses and medication/hospitalization.

What to do instead:

• Learn and utilize the different investment vehicles available right now that fits your risk appetite and preference
• Be consistent in allocating funds into those investments and savings accounts
• Consider consulting with a registered financial planner to help you with devising a plan for your retirement.

Learn More: How to Build a Retirement Fund

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Not learning about investing

• Investing isn’t only for the rich, everyone can start even with small capital
• It’s all about finding a platform where your money can gain significant growth whether for building wealth or protecting its value against inflation

What to do instead:

• Learn and explore your options, start with what your most comfortable with
• Mutual funds, UITFs, stocks, ETFs, PagIBIG MP2, PERA, Cooperatives — there are plenty of choices to check out
• Educate yourself with each platform and understand the risks associated with each
• Always do your due diligence whenever you’re putting money into any investment

Learn More: How to Invest

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Not having assets that generate passive income

• It’s easy to disregard passive income especially if you’re in your prime earning years.
• However, the sooner you can figure this out, the better. The goal is to get modest returns from your money which would otherwise be earning nothing.

What to do instead:

• Leverage existing platforms that offer better returns for your money versus the bank
• Examples include: Pag-IBIG MP2, Cooperatives, Fixed Income Securities (bonds, treasury notes, CDs, etc.,) 
• Consider renting out properties, space, or items that have potential demand
• Sell digital products
• Think of potential low maintenance business ideas

Learn More: Passive Income Ideas

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Not Investing In Yourself

• Often overlooked, learning new skills and developing new talents is crucial in discovering additional income streams
• Especially now that the type of work and skills needed around the globe are constantly evolving
• You wouldn’t want to end up with a job that can be easily replaced or replicated by machines or made completely irrelevant by new systems

What to do instead:

• Take courses, workshops, seminars. There’s lots of free content online to start with
• When possible, get certifications on those courses and seminars to boost your resume
• Use the skills you’ll learn to get side hustles for extra cash flow or for getting  promoted

Learn More: Strategies for Learning New Skills