Are you Mike that spends all his money on needs and wants or you are Jane that spends responsibly, but keeps making the wrong choices about spending regularly.
Financial mistakes are easily made by low-income earners, probably because of what they earn and inability to manage and plan how to spend.
One of the major mistakes ruining your finances is the inability to save. We all know the act of savings requires discipline, efforts, and time.
Most importantly giving up certain things you are already familiar with in life to help you save more.
Regardless, most people still found themselves making a lot a financial mistakes for decades.
In this article, we will be discussing some of these financial mistakes and how to recover from them.
10 Financial mistakes for low income earners
1. Little or no savings: Research shows that most people are leaving from pay check to check. This is mostly common among low income earners. Some have no savings and emergency funds.
They keep forgetting the fact that regardless of how much you make, it is essential to save some percentage.
No matter how much money you are making with your job, without savings you are bound to sink into debt or file for bankruptcy after retirement.
2. Bad financial decisions: Bad financial decisions always feels good in the short term but can be disastrous in the long term.
These decisions are taken without proper assessment of their long term value and impact on your finance.
Some of these decisions ranges from no savings to having bad financial partners.
Some can’t see money as a tool to make more money. Leaving from paycheck to pay check and running their credit score.
3. No insurance cover: Generally when your insurance is intact, things don’t usually get rough.
As soon as you can start forgetting to pay for your insurance bills, some issues will start arising, bad things starts creeping up.
One of the worst financial mistakes people indulge in is avoiding or forgetting to pay insurance which some low-income earners are guilty of.
Insurance can become more important in different stages of life. In case you are involved in some kind of unforeseen circumstance, you will need insurance cover for some of your bills.
4. Late payment of bills: A lot of people mess up their credit cards by recurring late payments which in turn puts a lot strain on their finances.
Some totally forgets about their bills and other concerns are linked with insufficient cash flows.
Paying monthly bills at times looks like hassle or like a burden, if you don’t have a system to automate your bills, you’re likely to slide into the risk of paying late.
5. Quiting your job before getting another: Due to the feeling of not being appreciated, under paid, couple with working extra hours.
Some made the decision to quit their job without getting another which have led them into major financial problems.
6. Sinking into more debt: Qualifying for certain loans doesn’t mean you should take the loan without any meaningful investment to use it for.
Sinking into bad debt more often makes it impossible to save for retirements, vacations, short or long term goals.
The more you borrow, the more interest rates you pay to service these loans and the more it gets impossible to reach your financial independence.
7. Failure to invest in oneself: When you procrastinate every time you lose the opportunity to invest in yourself, your financial state will be in jeopardy.
If you don’t learn things that will increase your skill set and put more value on your current career, you won’t be marketable.
The so called career will start making less money for you because you have not being updating your current skills, you become staled for the market and it’s economy.
8. Neglecting future financial need: A lot of people neglect their future financial needs by not putting adequate planning in place.
They also put lots of pressure on themselves about their finance and failed to live appropriately.
Failure to plan ahead for emergency funds will in no time sink you into money problems in the nearest future.
9. Failure to have money conversations: If you do not like to talk about money and how it has been affecting your life, emotionally or physically, you are making financial mistakes.
As a low-income earner, some benefits are associated with talking about your money problems with money managers.
By not talking to a professional, you are causing more harm to your finances.
10. Pleasing people with your hard earned money: Giving your friends maximum power over your credit cards might sink you into more debt than you already bargained for.
Many over looked this aspect by trusting their cards wholly to few trusted people in their lives, and the results most of the time always leave a huge debt on their cards. Related: 10 Best money skills to increase your savings.
How to make good financial decision
Finding out how money works is a crucial step in making good financial decision.
Start learning good financial practices by emulating what the rich people are doing to stay rich.
Look inward and stay in control of your finances. Don’t act blind to your financial decisions, make it a habit to always double check where you have been making good decisions.
Keep repeating it till you have more money to retire on. Have a plan for every dollar you want to spend, keep your budgeting skills on top of your money list.
Learn to live on less than you are making now and keep investing others in a well-researched business opportunities.
How to recover from financial mistakes
Knowing about your financial mistakes makes it easier for you to fight this battle.
As a low- income earner, you can recover from financial mistakes and start saving money with careful and realistic budgeting.
All you need to do is to determine the amount of money you need to start spending wisely.
Always sleep over purchasing decisions before buying things you don’t need.
Channel most of your income into things that can bring long term benefits. Stop wasting money on items you can buy just because you can afford it, without serving meaningful purpose.
Learn to stay in control of your credit cards by keeping it strictly for your essential purchases. Make a habit to start checking fine prints on credit offers thoroughly to avoid money related stress.
Also learn something scalable and things that solves people’s problems. Don’t sell your time, sell value. Learn how to leverage other people’s time, energy and expertise.
As a low-income earner you can get these benefits by exchanging your current service.
Final words, to avoid financial mistakes in life, you need to find an investment professional to work with.
Schedule some time with them and discuss how you can make better informed decisions on your financial state.
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