Common Mistakes People Make Regarding Their Finances (And How to Avoid Them)

In this day and age where credit cards and loans are easily accessible, coupled with the pressure of "keeping up with the Joneses," it's no surprise that many people are getting themselves into financial trouble. The latest kid to the block when it comes to financing products would be the "Buy now pay later" feature. Adding the aggressive marketing of e-commerce platforms where they hold monthly sales promotions to persuade consumers to spend, we have a recipe for disaster if one does not control their finances.

Everywhere we go, online or offline, we see some ad insinuating that we cannot live a happy life unless we own a particular product. It simply tells us that we need to have the best or the latest commodity; otherwise, we will lose out. But is it true? Do we really need to have it? Could this be the reason behind the financial troubles that so many individuals are experiencing today?

Suppose you're not one of them, congratulations. You're doing a great job. But that doesn't mean that you should rest on your laurels. If you're currently facing some form of liability due to overspending, know that it's not too late either if you change your habits.

Today, I'll be sharing 7 tips that will help you avoid the pitfall of financial indebtedness.

1. Live within your means

The first step to reign in those out of control finances is to have self-control and determination. This means that you need to make a mental decision only to buy necessary things and learn to say "No" to the other stuff until you can save enough for it.

2. Stop trying to have the best of all worlds

Most financial problems seem to begin here. The younger generation wants to enjoy the same lifestyle as their wealthy peers or influencers on social media, and they want to experience it right now. However, they fail to realize that everybody's circumstances are different, and their peers may have well-to-do parents who can support their lifestyle, while they would have to get in debt to keep up with them. They fail to recognize that one of the key factors of having a comfortable, stress-free lifestyle is not having too much financial debt.

3. Create a budget (and stick to it!)

A budget is an important tool that people use to control their limited financial resources and stay out of debt. A budget helps you control your money effectively and allow you to use it in the most fruitful way towards things that matter.

4. Make price comparisons

Unless you are filthy rich, you most probably need to save money for rainy days. One way to do it is to compare prices before you commit to a purchase. Saving a few dollars regularly (sometimes even hundreds of dollars for larger purchases) can help you accumulate quite a lot of money over time. Sometimes we get overly excited when we see an item we like and rush into buying it, and then realize that the store down the road might be selling it at 10% cheaper! Does this sound familiar to you?

6. Keep track of your finances

Something that sounds so simple but yet many people fail to do it, is monitoring their finances so that they know where their money is going. If you are one of them, you need to start keeping a record of your daily expenses. You may be surprised at how much you spend on trivial things or fees that could actually be waived, such as the annual credit card fee.

7. Save up for rainy days (and future needs and wants)

Unexpected emergencies can crop up anytime, which require us to have some money on hand. Whether it's a medical problem or helping out a relative in need, having some money set aside can make life much easier for you, especially when you need it the most. When you receive your salary, set aside 5% to 10% as savings.

If you are already in financial debt, it's not the end of the world. Indeed, sometimes we cannot control the circumstances that caused us financial difficulties, but we don't have to stay stuck. We can take steps to reverse the situation and become financially healthy again, even if it takes a while.

Keep these 7 tips in mind while making your financial decisions, and you'll be well on your way to financial independence and freedom!