5 personal finance mistakes you might be making without realizing
What's the story
Managing our personal finances can be a tough job, and even the best of us can make mistakes that go unnoticed.
These mistakes can have a serious effect on your financial health, over time.
However, by identifying and avoiding these common pitfalls, you can better secure your financial future.
Here are five often-overlooked personal finance mistakes you should watch out for, to stay on course.
Overlooked costs
Ignoring small expenses
Small expenses may appear trivial at first sight, but they can accumulate fast over time.
Most people don't realize how much they spend on daily coffee runs or subscription services.
These small expenses, when accumulated over a month or year, can make a huge dent in one's budget.
Keeping track of every expense, no matter how small it seems, is essential to stay on top of personal finances.
Financial cushion
Not having an emergency fund
An emergency fund serves as a cushion when the worst of life hits you: medical emergencies, job loss, etc.
Unfortunately, most people fail to keep money aside for these situations, making themselves vulnerable when unexpected costs crop up.
Ideally, your emergency fund should cover at least three to six months worth of living expenses.
Gradually building this fund by saving a little every month is key to financial security.
Future planning
Overlooking retirement savings
Retirement may seem eons away for most young professionals, which is why they tend to put retirement savings on the back burner.
However, starting early allows you to benefit from compound interest and build an impressive retirement corpus over the years.
Not contributing regularly to retirement accounts such as NPS may leave you with a bare minimum during retirement years.
Debt trap
Mismanaging credit card debt
Although credit cards offer great convenience, they also come with risks if not managed properly.
Carrying high balances and making only minimum payments lead to accumulating interest charges that increase debt levels rapidly.
It's important to pay off credit card balances in full each month whenever possible and avoid using credit cards as a means of financing lifestyle choices beyond one's means.
Periodic check-ins
Neglecting regular financial reviews
Many people draw up budgets or investment plans but fail to revisit them regularly due to busy schedules or complacency with what they had set up years ago under different circumstances than today's reality might dictate now.
Periodic reviews help identify areas where adjustments need making based on current income levels versus expenditures incurred since the last review period ended.