Personal Finance Habits You Should Avoid
Many people don’t understand what personal finance is. It is even surprising to know that there are some professionally trained finance personnel’s that can only manage company accounts and yet fail to manage their personal finance accounts. This is one of the reasons why anyone can become broke no matter what their job is. It is therefore important that we look at some of the ways in which we can effectively manage our finances and avoid falling into an endless debt cycle.
Don’t jump at every loan opportunity
If you have a good credit record, more and more people will approach you with a loan offer or a credit purchase. It is very important to never lose your stepping on this one, no matter how many loan offers you get only get a loan if you have planned to get one. An unplanned for loan will mean that you may have to start paying back the loan at a time you had not prepared to and this may increase the risk of faltering payment.
Don’t shy away from credit
Many people think the best way to manage personal finances is to pay everything in cash and avoid credit. This is not a good idea at all. There are certain times when you need to make a payment and you may not have cash in your pocket. Deferring payment to another time will only attract a penalty. However if you have a credit card it is possible to make the payment and pay less in terms of interest as compared to the amount you would have paid in penalties. So getting credit can actually help you reduce your financial woes.
Don’t spend before budgeting
It is very important that whenever you have incoming money, you first draft a budget before spending it. This will help you determine how much money you need to channel o payment of bills thus giving you an idea of how much you will have for miscellaneous.
Don’t invest impulsively
As the world is currently under a global financial crisis, many people are looking at ways they can invest their dollars. However not all investment are wise in actual fact some investments may carry a high risk component such that you may lose all your invested money. It is therefore important that you don’t invest in a certain business only because a family member also invested but invest because you know it is advantageous to do so.
If borrowing, don’t borrow more than you really need
Some people make the mistake of borrowing as much as they can whenever given the chance to do so. It is very important to know that the more you borrow the more you will have to pay back in terms of interest. It is wiser to borrow the exact amount you need so as to cover your debts. If you think credit is a way to finance your luxuries, then you will be at high risk of filing for bankruptcy in the long run.