Things that are harmful for your financial freedom
Updated: Sep 2, 2022
Avoid these common money mistakes. They’re harmful for your financial future and can negatively affect your wealth creation strategy.
On your journey to achieving financial freedom it’s important that you’re being smart with your money. Thus, it’s essential you’re aware of the common mistakes people make with their finances so that you can avoid making them, too.
Things that can harm your financial well-being include:
Living above your means
Are you constantly spending more than you can financially afford to?
If yes, you’re probably living above your means. This can be avoided by establishing and sticking to a diligent budget. One that allows you to carefully save and invest your incomings for your financial future. Which leads to…
Not having a financial plan
A sure way to harm your future financial success is not having a financial plan. A financial plan is a crucial component of a successful wealth creation strategy. Once you establish a plan you can make informed financial related decisions and follow through with it, because you know what you need to do.
A good financial plan is made up of:
Goals (yearly, five-yearly, and 10 years +)
Your net worth (comprised of your assets minus your liabilities)
Budget and cash flow planning
Debt management plan
Emergency funds and insurance plans
Living from pay-check to pay-check
Be sure to save and invest a portion of your income. If you’re someone who lives purely off the income that you make; you’re jeopardising yourself from achieving future financial freedom. The earlier you start to save a portion of your income, means the more wealth you can accumulate for emergency situations and your retirement.
Using Buy Now Pay Later platforms
Are you someone who religiously uses Buy Now Pay Later platforms? While some of these platforms are not credit facilities, there are providers who have a right to report regular missed repayments. Thus, impacting your credit score and ability to acquire future finance for homes etc. This is because many lenders view you as a liability and are less confident in your ability to repay loans.
If you’re trying to establish a successful wealth creation strategy, it’s recommended that you avoid using such providers and pay for items up-front and in full.
Living on unnecessary loans and racking up credit card debt
This one goes without saying; don’t take out unnecessary loans and stop putting everything on your credit card. Personal loans and credit cards usually come with high interest rates and hefty late fees. If you cannot afford to repay them, you’re putting yourself at risk of harming your line of credit and ability to access ‘good debt’ i.e., mortgage and investment loans.
Just like any other loan, you should never take out a loan unless you’re capable of fully paying it back.
Other things to avoid harming your finances and wealth creation strategy
1. Shopping on emotions. You will end up spending more than you need to
2. Losing track of your finances
3. Investing without an adequate plan
4. Not having an emergency fund/ war chest
5. Signing into financial contracts without fully understanding them
6. Lending money to people who you know will not pay you back
7. Buying things that you’ll not use
As always, if you require any more information on how to structure your finances and existing loans our finance specialists are here to help! If you’re in need of a financial planner to help get your finances in order, we have a close network of experts who can help too!
Give us a call on 1300 130 932.