Everyone makes mistakes in life. However, there are some mistakes in life that can have a much larger consequence. In particular, money mistakes that can spoil your financial game plan is the worst. Money mistakes that can put your financial game plan in jeopardy can also put your life in jeopardy.
Here are five money mistakes that we think everyone should be avoiding because they are just too damaging on your financial game plan.
5 Money Mistakes You Didn’t Know Was Spoiling Your Financial Game Plan
Credit card isn’t the same as a debit card, even though they might sound similar. With a debit card, you can only spend the amount you have in your bank account. With credit card, you can spend beyond what you have in your bank account. If you spend your credit card as though it is a debit card, you can end up with a serious financial problem: Debt.
If you are familiar with credit cards, you might point out that “paying off the debt” isn’t difficult. All you need to do is to make the minimum payment every month. If that’s your mentality, you are in a worse state. Did you know that a $2,000 credit card debt will take more than 30 years to pay off if you just make the minimum payment? Just imagine if you have a credit card debt that exceeds $2,000.
Lifestyle inflation is defined as the increase in spending whenever your income goes up. The result of lifestyle inflation is that no matter how hardworking you are or how well you are able to climb the corporate ladder, you are unable to achieve good financial health. You end up spending your pay raise on fancy cars, fancy clothes and even fancy dining experience. While it is not wrong to pat yourself on the back with a treat, make sure you don’t over-do it and get too relaxed with money. Trust us, it’s easy to go overboard with spending money.
‘You Only Live Once’. Yes, we understand the meaning of YOLO. YOLO is a way of life as well, just that some people take the meaning of YOLO too literally. There is an easy way to identify whether you are YOLO-ing too much. If you find yourself splurging at the start of the month and scrimping at the end of every month, you might be one of them who’s taking YOLO too literally.
So, why is YOLO bad? Well, it isn’t bad until any of these three scenarios happen: (1) Your flow of income stops, and you still have debts to pay off; (2) You need to plan for a big-ticket item but you realized that you have no savings; or (3) You are getting loans to fund your YOLO lifestyle.
A less common money mistake that anyone could potentially make is to put an overemphasis on saving. Yes, saving too much can be a money mistake too. How so? Well, it turns out that there is an invisible force that devalues the dollar value of your money every day. This invisible force is known as inflation. Over the long run, your savings will “deplete”. While the dollar amount is still the same, the amount of goods and services you can buy will be much lesser.
Thus, instead of just saving, you also need to include the element of investing into your financial game plan. Investments allow you to beat the impact of inflation by letting your money work hard for you instead of earning that meagre interest in your saving account.
Insurance is one of those under-appreciated financial assets that can enhance your financial game plan. You can think of insurance as a safety net for your financial game plan. How can your financial portfolio not have any safety net?
Insurance typically offers financial protection against big ticket life events like accidents, injuries, disabilities and even death. Without insurance, the expenses for each of these life events will be too much for you to handle with your personal savings. Not only will it deplete all the savings you have, you might even have to enter a debt. Thus, for this reason, insurance is an important component for your financial game plan.
Not yet started on your investment journey? Still haven’t gotten the right insurance for your financial portfolio? Engage in a financial discussion with Moneyline.sg’s team of advisors to avoid making these money mistakes and enhance your financial game plan today.