5 Common Money Mistakes To Avoid

Money mistakes are particularly destructive because they can undo years of delicate planning and diligent financial habits. People who lose everything can often trace the beginning of their financial troubles to one or two errors that multiply into an avalanche of struggle.

Take note of these 5 common mistakes. Avoiding them can be the difference between financial independence and financial bankruptcy.

Mistake 1: Frivolous spending.
The secret to realizing your financial goals is to save money. However, it is impossible to save if you spend all your earnings. Avoid this money mistake at all costs. Determine your values and set financial goals, then align your priorities with these goals before making purchases.

Mistake 2: Spending excessively on housing.
According to the rule of thumb, your housing expense shouldn't be more than 30% of your income. Although for some this is a great start, the 30% figure may not be the best for you. The amount you allocate for housing depends on your list of expenses and your financial situation. Choosing to live with roommates is also a great way to cut down on housing expenses.

Mistake 3: Living from paycheck to paycheck.
One of the most common money mistakes people make is to spend every penny they earn. It is very important to save so you can have something to fall back on when you have an unexpected expense. It's a good idea to use the 50/15/5 rule to organize your finances. Allocate 50% of your income to your monthly expenses, 15% towards your savings and 5% for your emergency fund. You can then use the leftover to build investments.

Mistake 4: Not planning for retirement.
We tend to forget how important long term goals are, so we easily bypass them. However, it is easy to save towards these goals when you begin early. Start by saving at least 15% of your annual income towards retirement and utilize the power of compounding to earn interest on your funds by investing them.

Mistake 5: Not investing.
The secret to attaining financial independence is to get your money working for you. Understand the time required for your investment to grow and the level of risk you are willing to tolerate, then invest the funds in investment products that match your goals. You can start your investment journey with a firm like [url]overwood.ng[/url]. OVERWOOD offers products to help you grow your wealth while protecting your principal always. They are a safety first investment firm in Nigeria.