The subject of personal financial planning, for many, is still an unknown field, even after adulthood.
This theme had to be debated from childhood so that the child could begin to understand the value of money and, by the time they reached adulthood, could organize themselves to realize their dreams, such as buying the first car or a property. However, the reality is quite different and most people have no control over money, which results in many debts.
In order to change this, one should learn to use money to their advantage and not live for it. Above all, you need to understand where your biggest mistakes are so they can be corrected. To help with this step, we have separated the most common mistakes from personal financial planning and how to avoid them. See below:
1. Not knowing your expenses
It is a fact that most people who have money in their wallets end up spending it and often do not even know what. Although this value seems small, if you add these “small expenses” to the end of the month you may realize that they are not that insignificant.
Jotting down everything you spend is critical to starting to organize personal financial planning.
Mark everything you spend. Do this in a spreadsheet or even purpose-built apps that help keep your accounts up to date.
2. To think that fixed expenses do not change
Fixed expenses are those bills that must be paid every month, such as water, electricity, rent, telephone and others. Although there is no way to get rid of them, the values can change from month to month.
It should be noted that these expenditures can vary and average to be able to make proper planning, but always aware that they change.
3. Failing to track accounts
Not keeping track of accounts often causes us to spend more because we don’t know exactly how much we still have. Therefore, much more than noting all expenses, you need to follow up at least twice a week.
By doing this you know how much of your salary has already been used to pay bills or other expenses and how much you have until next month. This makes debt settlement more difficult.
4. Want to buy everything right away
Buying on impulse often ends up paying more for a product because price research has not occurred and a comparison of values cannot be made. Especially when we are talking about higher value goods, research is essential, besides, of course, calm when buying, always waiting for the right moment.
Remember that not only purchases of goods should be done carefully, but outings and dinners also need to be part of personal financial planning, with stipulated values per month.
5. Buy everything in installments
Suffice it to say that the purchase can be made in installments and without interest that people soon rush to buy, after all, only need to pay later. The problem is if you don’t have money now, will you have it in the future?
As small as the parcel is, if all of your purchases end up in installments, the sum of these small installments will weigh heavily on the budget. Not to mention that even having no interest, a spot trade can yield a good discount.
Use installment payments only after you include it in your financial planning and if it is extremely necessary. For all other cases, always choose to pay in cash.
6. Not knowing how the credit card works
Credit card seems like the magic solution to all your problems, as it allows you to pay your bills and pay only 40 days from now in some cases. Best of all, if you don’t have the money to pay the full bill, you can only pay the minimum amount.
If all this were so wonderful, there would not be so many people in debt on credit card. It should be understood that it can be very useful as long as its operation is known. The card is a great solution to install the bills as long as you have the money to pay the full amount of the bill, otherwise it will generate interest charges that will make your debt much larger in the short term.
Keep in mind that this form of payment should only be used in emergencies and only when it is well known which cartoons can be generated.
7. Do not include an emergency reserve in personal financial planning.
Planning finances means thinking about all the possibilities that involve your money to achieve your achievements. If you want to buy a car, you will need to raise money or get organized to pay the installments, but along the way there may be an unforeseen event, such as being fired, for example. So what will you do to meet the commitments?
The financial reserve is crucial to help at these times. The ideal is to allocate about 10% of earnings every month to form it, remembering that this amount should not be available in the checking account so as not to mix with the rest of the money.
It is indicated that it will be applied to some short term investment, as this will pay off and can also be used in emergencies.
8. Want a standard of living you can’t afford
Who wouldn’t want to squander money without worrying about it? But you need to match your reality and standard of living to your earnings. It’s no use wanting to eat out every day, have the car of the year, and live in a prime place if you can’t afford it.
You must be realistic about your possibilities. This is not to say that you need to give everything up, but to adjust your accounts so that they are not negative every month. By doing your personal financial planning correctly you can enjoy some pampering within your means and still buy the car or house of your dreams. Check out how financial planning and organization can help you reach your personal goals!