Mistakes and Human life:
Mistakes are part and parcel of human life. Hating or shying it away will not do any good to us. Making mistakes, learning from it and moving on ,is one better way to live our life. We are bound to pay for mistakes we make. Running away or blaming others would not cut the consequence of our mistakes. Mistakes mean many thing to many people and each one’s definition may vary from one another. Mistake can be simple or severe, small or big, routine or rare, negligible or costly, which are all based on circumstances and people involved in it. In this blog, we shall look at the 21 financial mistakes that everyone should be aware of.
“ Make mistakes, Learn from it, move on, make some more mistakes and don’t forget to repeat the process” – Aarth
What does mistakes mean to you?
“Making mistakes means you are human” – unknown
Mistake may mean one thing to you ,other to me. Each profession has its own set of minor and major mistakes .As a banker ,mistakes may mean loss of money, credibility, integrity, valuable and manpower. For Doctors and other medical professionals ,mistakes may mean death or life long struggle. The same goes for passenger flight pilots who are not meant to make mistakes with all the lives in their hands. A student’s mistake may mean losing valuable time for knowledge, whereas a parent’s mistake may mean breaking their child’s self-respect. Similarly, a teacher’s mistake may mean destroying dreams of the pupils.
Man’s endeavour in any field of science, art and technology is filled with mistakes and achievements caused by that mistakes. Defining our mistakes in such a way that it betters ourselves and not giving powers to it to define us.
21 financial mistakes that everyone should be aware of.
Financial mistakes: Awareness and Avoidance.
“A mistake should be your teacher, not your abuser. It is a lesson, not a loss. It is a necessary detour, not a dead end.”
1. We Don’t Pay ourselves First.
When our salary or income arrives ,we start to pay our bills and start spending again. This habit of paying bills and spending should be replaced with paying certain amount of income to ourselves first before any other payments. Paying oneself first gives us a psychological boost to retain the money and avoid the urge it spend it.
2. We don’t have financial plan.
Planning is very important when we are not that smart in handling our personal finance. We can get a lot of free sample financial plans such as setting goals, budgeting plans, saving plans, spending plans, investment plans, family financial plans and of course pension plans. We have to modify the plans to our needs and priorities. The main gist is “We should have plans for our money and ourselves”.
3. We spend more than we earn.
The most and common financial mistake we do is to spend more than we earn. The easy and faster availability of credit via credit card and other credit channels have made us an easy prey to the consumerism. A better way to handle our spending is to track our expenses and make it need-based & value based. Once we track our spending ,we will have the power to stop or divert it for better financial decisions like saving and investing.
4. Accumulating debt over debt.
Debt can be quite useful to grow our financial state but over-borrowing or over-stretching credit limit would be fatal to our financial health. The best solution would be to finish off one debt before going on to next one. Another way is to limit our monthly dues of all our debts below 40% of our net income. This way we will have 60% of our income to living expense and other savings.
5.Borrowing for others (family members, relatives and friends).
The other common financial mistakes we tend to make is borrowing money for others like family members, relatives and friends. Even when we don’t money in our hands, we tend to borrow money for the sake of fake obligations or duty or responsibility. Never borrow money for others because of two reasons:1)You are solely responsible to pay the money back and 2)The other person(s) doesn’t have any responsibility or obligation to payoff the debt for you. In most cases they don’t even care of your debt once their job is over.
6.Looking for quick money.
“Quick money” ,”Get richer faster”, ” Beat the stock market and become millionaires ” and “Win millions in one month by just one click” -These are hot catch phrases used to lure us into spending our valuable hard earned money. Scammers, fake online gurus, stock market “experts” and other “well wishers” use our attraction to quick cash to wipe out our bank balances and wallets. We should be aware of this financial shark called “Quick cash” and remind us that quick cash goes away quicker than it comes.
Some of the other financial mistakes we tend to make are listed as below:
- We are not sure of our priorities or reluctant to decide our life and financial priorities.
- Not updating ourselves with financial literature and knowledge.
- We Don’t Ask For Help.
- Not having a tailored budget to our financial needs and situations.
- Depending on just one stream of income.
- Not making ourselves aware of perks of our job.
- We don’t have money talk with spouse and/or children.
- People don’t do enough research or study about alternative ways of spending or saving or investing.
- We are not aware how much it cost to bring up a child.
- Our Kids are not taught the value of money.
- Cosigning a Loan or signing as guarantor without reading the contract.
- Mishandling our pension or retirement amount.
- We pay too many fees for subscriptions and financial services like planning, budgeting and investing.
- Spending money because of social, family and peer pressure.
- We don’t do monthly, quarterly, half yearly or annual auditing of our financial situation.
There are many more mistakes we tend to make in our lifetime which you can add the above list.
Psychologically better ways to approach our financial mistake:
“Mistakes have the power to turn you into something better than you were before”- Unknown
How we approach the mistakes make the difference between repeating it or learning from it.
Use mistakes as learning experience:
A better way handle mistakes is to think of them as learning experiences.Our brain record certain mistakes permanently and some mistakes pass away easily .It is responsibility to imprint other mistakes consciously so that we don’t repeat it again.
Have system of habits to solve the problems we face:
“Purpose of every habit is to solve the problems we face” -Atomic habits by James Clear.
As James Clear says in his book “Atomic habits”, we ought to develop a system of tiny habits which helps us to clear off our mistakes and problems. If we want to be financially free, then we have to develop a system of habits like consistent learning, multiple earnings, compulsory savings, frugal spending and thoughtful investing. The system may not be completely fool-proof against mistakes but it will build our resilience against it. We will be powered to avoid major financial traps and fall outs by our own system of effective habits.
Use Humour to counter the ill effects of mistakes:
We often beat down ourselves mentally (sometimes physically) for mistakes we make. We feel useless, depressed and broken because of the mistakes. Humour is always a better way to alleviate our mood away from depression. Add to it, humour also helps us to laugh off the mistakes and make us feel comfortable with it.
Make ourselves comfortable with mistakes:
It will harder to face mistakes if we time and again fear to make mistakes. A whole set of participants are required to make ourselves comfortable with mistakes. The first and foremost participant is ourselves. Other participants are our parents, teachers, close relatives, friends and colleagues. We as individuals should understand and accept that we humans are prone to mistakes.
We as a society and as a nation make mistakes. Then why do we have punish children when they mistakes? Why does our society punishes people who makes mistakes?Children and adult are threaten with fear of punishments if they mistakes. Now do we explain the purpose or reason for the punishment? No we don’t in most cases though we pride ourselves as creature of supreme reasoning .Teaching the children to face the consequences of the mistake is the sole purpose of punishments. The same goes to adult too. The consequences of our mistakes has to dealt by us alone.
Suggestion/Opinion from Team ArhaathS:
We, humans are not prefect creature and are build with all the mistakes that exists in the universe. To strive for perfection is a lifelong process for every human though no human has ever attained perfection in all spheres of life. Our humble suggestion to all our readers is to make yourselves aware of the financial mistakes and try to educate yourselves continuously of all the risks and pitfalls. But never ever be afraid of making mistakes and let it stop from adventuring into new terrains of financial world. Some lessons are learn by our own mistakes and some are learn from mistakes of others. Learn the ways and share it everybody.
We would be more than happy to know more financial mistakes that you are aware of in addition to the 21 Financial Mistakes that we have stated in the blog.