Top 18 Financial Mistakes and Solutions

Why everyone can’t become rich living on the same planet, because many people don’t have opportunities for earning and learning. If you are reading this article, it means you have a lot of opportunities for learning and then earning. You can be wealthy if you have passion and interest in learning finances, marketing, and productivity. You will also learn Financial Mistakes and Solutions too.

Therefore, in this article, you will learn the top common financial mistakes, that you should avoid to be wealthy. You should keep away from these financial mistakes to be successful in your financial life.

Let’s learn all the top common financial mistakes and how should keep away from them:

1. Spending More than What You Earned

The most common financial mistake is spending more than earning. This is a common mistake no one individual, business, or country would be rich or successful with this mistake.

When anyone spends more than his or her earnings, the individual will take a loan every month and one day loan will grow than payable income. The individual or business will be defaulted.

Solutions

One option is the individual should think about increasing income, in this situation the individual should learn how to increase income to fulfill expenses. The individual can get a part-time job, start a part-time business or online business, get a job on a higher rank, or expand existing business etc.

The second option is to reduce expenses, make a list of the stupidest expenses and learn how to avoid them immediately. When we learn we realize many expenses are not necessary, and not important. We are wasting our hard-earned money on them.

2. Not Making Investments

Many people think that the investment is only for wealthy people, but in reality, they are wealthy due to investment.  According to their thought, we will invest in real estate and stock when we become wealthy or successful.

Not making any type of investment is a common mistake, failure or poor people do in their life and never get success.

Solution

Investment not only in finances but on you is also necessary. Investing a specific percentage of your income regularly will make you successful. Investing in learning, betterment of health, increasing income sources, boosting the mind etc. will also make you successful.

3. No Emergency Savings Fund

It’s also a part of investment and a top financial mistake that most of the failures make in their life. People trust and also depend on loans and credit cards. They obtain loans when required for emergencies and pay higher interest on this credit. These interests repeatedly prevent them from becoming wealthy.

Credit companies manipulate them with ads, they always promote their loan, as best for any type of emergency and having low-interest rates but in reality it’s not true. They also advertise that you don’t require saving for emergencies.

Solution

You should save an emergency fund before other investing. You should save the emergency fund where you can grow it like mutual funds, and stocks. This emergency fund will grow, and it also earn for you after a specific time. When it grows from the predefined level you should invest the extra amount in other investments like real estate or stocks.

4. Not Budgeting

Not budgeting income and expenses is also among the top financial mistakes related to the above-mentioned topics. You can see this mistake in failures.

Without budgeting you will expend on the stupidest things and miss the most important like retirement plans, learning, emergency funds, investments, etc.

 Budgeting is not only important for individuals but also for businesses, companies, and countries. You can see the expenses ceiling of every head in the successful companies.

Solution

You can estimate your income from previous months to make a budget for expenses. Write down all your payments in columns. First of all, fill in the most important columns without them you can’t survive like groceries and utilities.

In the second column write down the amount of investment, retirement plans, emergency fund, learning, improving life, etc.

In the third column, you should include expenses like entertainment, picnics, etc.

You should set a percentage of your income in all these columns even if you are earning very low or high. Put in on your emergency fund, investment, learning, and retirement plans from $1 to a maximum. You shouldn’t ignore them. This minimum endowment will make you successful one day. 

5. Not Planning Your Taxes

People pay more when they don’t plan taxes. Governments provide subsidies, discounts, and concessions on taxes on many schemes like investment, retirement, mutual funds, small businesses, startups, passive incomes, and real estate.

Solution

You should learn and invest in tax saving schemes to save from taxes along with getting profit and making assets. For example, if you invest in a mutual fund you will receive a tax rebate or concession.

Therefore, you should save emergency funds in a mutual fund instead of a checking account or savings account. When the emergency fund crosses the limit you should transfer this extra amount to any other type of investment. This strategy can be applied to other tax-saving schemes.

Learning taxes will make you more smart and wealthy, therefore, I always emphasize expanding learning in finances, marketing, and productivity.

6. Not Planning For Retirement

You can see around yourself many rich people became poorest at the old age. Mostly artists, actors, players, and small job holders became victims because they focused on earning and their existing skills but didn’t learn saving, investing, retirement plans, and passive incomes.

Solution

Invest a percentage of your income in a retirement plan. Learn how to take maximum profit from a retirement plan and how to make it more beneficial in old age.

Learn to create some passive income along with your active income that can maximize your income when you are not in a working position. These may be blogging, YouTubing, E-commerce, investing, affiliate marketing, automatic businesses, etc.

7. Not Having a Financial Plan

When you make a plan for what you want to achieve in your life, it will compel you to achieve early and to take action. Without a financial plan you can’t get success. Plans are a roadmap to achieving anything.

 Not having a financial plan is a top financial mistake that every not successful people have.

Solution

First of all, write down in your notebook, what you want to achieve, it’s maybe a house, car, jewelry, abroad visit, or all of these. The financial plan should be SMART (specific, measurable, achievable, relevant, and time-bound).

Make an action plan, how you can achieve these financial plans, and what you should learn to achieve it. Start taking action on it as soon as possible.

If you don’t create a plan you will don’t achieve anything, you will not learn, and you also will not take any action but you will waste your time like many failed people.

8. Availing Debt Unnecessarily

Getting a loan for beneficial projects is not a bad habit but availing unnecessarily loan is a financial mistake that you should avoid. Most people avail of loans when they watch ads, for emergencies, for homes, etc.

Using credit cards for everyday expenses and having too many credit cards is also a shape of availing unnecessary debt.

Solution

If you save for an emergency, you don’t require loan and pay high interest on it. When you make a financial budget you avoid the stupidest expenses, and when you have a financial plan you will act on it to achieve it.

Keep a minimum of credit cards and avoid using them for daily expenses. You will pay most of your income on interest, fees, and charges to the credit companies.

These steps will prevent you from availing unnecessary debt.

9. Getting Behind on Your Payments

You have to pay most of the payments on a monthly, weekly, quarterly, half-yearly and annually basis, like utility bills, subscriptions, education fees, etc. but when you don’t make budgets, you forget them and you pay an extra amount as interest and fines on them.

Solutions

You should make a budget and include this payment to avoid paying late or paying after getting into debt. You can also download accounting apps to make a budget, to remind payment’s last dates, and to control your expenses. You can also analyze and examine your expenses easily on these apps for future planning.

10. Not Reviewing Your Financial Plan

When people make their financial plan they don’t review it. They also don’t include new technologies in it. Most of the people don’t make but who make a financial plan for their life they don’t review. If they don’t include new technologies in it, then they can’t achieve it, this plan could fail without reviewing and changing.

Solution

Review your financial plan at the end of every year. Amend it according to the new technologies and businesses. To amend easily you should write a financial plan in MS Word or Google Docs instead of a diary or register. In these applications, you can copy and amend it readily.

11. Staying at a Dead End Job

Many people complain about their jobs but don’t apply for other jobs to leave them. They think searching job is only for younger people. They also don’t learn new skills to switch jobs and always grievance about additional workload, low salary, unprofessional behavior of management, etc.

Staying at a dead-end job and not leaving it for a new job or business is also a common financial mistake of people who never became wealthy.

Solution

Make a list of new and trending skills that you can learn easily. Learn it as soon as possible without leaving your previous job or business. Practice these newly learned skills at new businesses and companies to learn more.

Make new resumes including new skills and job experiences. Start applying on digital platforms regularly.

The same strategy applies to switching businesses.

12. Going Without Insurances

Different types of insurance are available like health, life, vehicle, assets, and building insurance in the markets. You should get it according to your requirements. But going without insurance is a top financial mistake. You or your family will survive harder or could collapse without insurance.

Solution

Make a list of insurance that you require. Research on insurance companies and choose the best one. Include the insurance premium amount in your budget and financial plan. The most important insurance is life insurance and health insurance. You shouldn’t avoid both if you want to achieve financial success.

13. Reluctance to Pursue Financial Education

Why financial literacy is necessary to achieve success? Financial literacy enables people to make budgets, and financial plans, choose the best investments for saving and retirement, and select the best insurance company and insurance product for themselves.

People think financial education is only for financial professionals and not for other professionals but it’s wrong. Everyone should learn finances not be an expert but learning for yourself is necessary. Financial education is like walking, every human being learns to walk in the beginning without any plan. Financial education is also necessary for every human walk.

Solution

Get an online course on personal financing as soon as possible. On the many platforms like Khan Academy, the personal finance course is free but you can select any other platform or course your favorite one. A bundle of online platforms like Udemy, SkillShare, Coursera, etc. is available.

After getting a basic course in personal finance you should select another course where you want to invest for your future. If you want to invest in stock then get a stock and share market course but if you want to invest in real estate get real estate courses.

14. Not Checking Credit Score

Getting a loan is not dreadful, but most of the time it can be good for achieving success and financial goals. Mostly for businesses, it is necessary items, they often require different types of loans for expanding and surviving.

The financial mistake is to neglect credit scores. Credit scores might be better with a little effort. The best credit scores will help you get more and easier credit. You can also get concessions, discounts on interest rates, charges, and fees on credit.

Solution

Learn how you can improve your credit score. There are plenty of ways and strategies written in our article to read and improve your credit score click here.

15. Leaving Job without planning

 People leave their jobs without any planning for personal reasons. When their boss scolds them for mistakes or delays in work and when they are bored with their existing job. Other reasons are also present to leave the job. But leaving a job without planning is a financial mistake.

Solution

Before leaving a job for any reason you should make a plan. How you will survive without a job or until you get your next one? You should learn, practice, and apply for your next job or business before leaving your present job. You can also start a passive income for your survival without a job permanently.

16. Spending Too Much on Your House

Many people spend all their investments, savings, and funds on purchasing or lavishing their houses. They don’t leave anything for emergencies, businesses, investment, or future expending, etc. Spending all the amount on houses is also a top financial mistake.

Solution

Purchasing a living house is not a poor choice but you shouldn’t spend all of your deposits on it. It should be a part of your investment or a part of your financial planning. You should leave the amount for pension, health, emergency, etc. when purchasing or lavishing a house.

If you want to purchase a house or expand it, you should include this amount in your budget and financial plan. This planning will not disturb your other part of life.

17. Leaving Money on the Table

Many times we miss the opportunities due to lack of education and experience. Most of the time, we also don’t take serious to many opportunities and don’t amend our budgets and financial plans with the new technologies. Missing opportunities is also a top financial mistake. People may be wealthy or successful if they don’t ignore opportunities.

Solutions

Opportunities can change the financial position of the individual or nation if we learn them and take them seriously. Many regions developed when they learned and earned by IT. But many of them remain in the same positions due to not taking benefit from technology.

The best way of taking as much as possible benefits from the opportunities is to learn consistency and to update you with markets and trends. Read marketing and business blogs, articles, and magazines and implement the mentioned strategies, studies, surveys, and techs on you and your business.

18. Failing To Diversify Your Income Sources

People depend on only one type of income i.e. job or one business. Whenever it fails, people go bankrupt and are never able to start new businesses or able to live a happy life again. They can’t be able to be financially free in the future. Failing to diversify is also an apex financial mistake of failed people.

Solution

If you have a job, start part-time another job or easy side hustle like blogging, YouTubing, photographing, teaching, etc. you can also become a part-time stock trader and investor if you have suitable finance. You can also invest in other businesses to diversify your income.

You shouldn’t ignore diversifying because to survive in the immediate changing world is not only important but necessary.

BOTTOM LINE

Many people struggle a lot to be successful, wealthy, financially free, or to live a happy life, but they fail to do so, due to only not learning and not avoiding financial mistakes. They earn more but don’t invest, insured, save for emergencies, and also don’t save for retirement.

They also expend their hard-earned money on taxes and the stupidest expenses due to not having financial literacy. Many people fail due to not diversifying their income and trying to survive on one income. They bankrupt when this one source became useless due to new technologies or any other reason.

These are the main financial mistakes that keep people poor even right income, you should avoid them.