by Amon Karagara

Created on: July 25, 2010   Last Updated: July 26, 2010

A lot of people make financial mistakes, some of which are usually minor. But there are those that can cost you big and should be avoided. Below are the most common personal financial mistakes that could cost you big: 

Living on debt. Borrowing to take care of your daily living expenses is a very grave mistake. When you do this, it means you are living a lifestyle that you cannot afford. In other words, your income is less than your expenses, thus resorting to credit cards and personal loans in order to make ends meet. This can have a negative impact on your financial life and should be avoided by all means.

No budget. If you just earn and spend without knowing exactly where and how your money is being spent, you are making a huge mistake. You could be making unnecessary expenses that you could otherwise avoid if you had a budget in place. So a budget is essential and skipping it is a big financial mistake.

Not saving at all. We all need to put some money aside to take care of emergencies and other unexpected expenses, invest, make major purchases, as well as ensure a healthier financial future. Not saving at all basically implies a miserable financial lifestyle for you and your family.

Making late payments on bills and loans. If you don’t pay bills on time, you are most likely going to incur late payment penalties. In addition, these late payments will be reflected in your credit file, which drives down your score, making it harder for you to qualify for loans when you need to make major purchases (such as a home or vehicle), or increasing your interest rates.

Inadequate insurance coverage. In the event of an unexpected, are you prepared enough? For instance, if you fall sick, can you pay all the expenses out of pocket? If your car is involved in an accident, can you afford the costs involved? If a catastrophe hits, are you able to get out of it using your own funds? Well, such emergencies are too expensive for most people, and this is when insurance becomes vital. So, you should always be prepared by carrying enough insurance coverage. Consider your financial situation and get the right coverage or you will be in for a shock in case of any eventualities.

No idea of where you are headed financially. This is more like living today and forgetting about tomorrow. If you cannot define where you want to be financially over a given period of time, you are making a huge financial mistake. You must know what you want to achieve and a plan on how you want to make that happen.

Not spreading your risk. If you invest in stocks, bonds, etc, or are a businessman, it is risky to put all your eggs in one basket. If anything should happen, you will incur devastating financial losses. For instance, buying all stocks in one company is a huge risk. If you choose to do business, putting all your savings into one business is a risky venture and can cost you big.

Avoiding the above financial mistakes could help you lead a better financial lifestyle.

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