Managing personal finance is a serious matter and there are things to avoid in order to achieve financial freedom in the long term. Here is what you should watch out for:
· No budget: The purpose of a budget is to allocate fund to meet various monthly expenditures and to ensure that you are spending less than what you have earned to create a surplus fund. The excess amount can then be saved for emergency purposes, retirement or investment.
· No emergency fund: Emergency fund covering normal monthly expenses, lasting for three to six months, is set aside to meet uncertainties in life especially during unemployment. In such a period when there is no income you can use the fund to live a normal life for a few months.
· No insurance protection: Accidents do happen. It is necessary to obtain insurance coverage to reimburse medical expenses and be compensated when you are disabled as a result of an accident. It is also necessary to secure a stream of income in case of critical illnesses. Take insurance cover to claim for hospitalization and loss of income when you are unable to work due to serious illnesses.
· No financial plans for the future: Plan early for your children’s higher education and your retirement. The earlier you start, the smaller will be the amount every month you need to put aside to accumulate for such purposes.
· No control in spending: Spend at your whims and fancies will lead to overspending and incurring debt. If it goes unchecked, interest on interest will be added to the accumulated outstanding amount. You can be a bankrupt if the debt is beyond your means to pay. You are especially vulnerable to spend more than necessary when you have credit cards.
· No self-investment: It is important to do self-study, take up courses or attend classes to acquire new skills to secure your job and enhance your earning power. A valued employee is someone who possesses multi-skills.
· No knowledge about money and related matters: It is unwise to leave your money in financial institutions because interest collected is not enough to keep pace with inflation. You need to be knowledgeable about various investment channels to diversify and grow your wealth.
Stay away from the pitfalls of personal finance and be successful in money matters