Top 10 Reasons People Suck at Personal Finance

The recent recession may have taken the entire world by shock, but there are certain people who felt the impact more than others, and they’re the ones who have no idea of the importance of basic financial sense like budgets and plans. They’re riddled with debts and are struggling because they have no jobs and no nest egg to fall back on. And even though most of the world is limping back to normalcy, many people yet to see light at the end of the dark tunnel they’re traversing because they suck at personal finance. And the reasons for this are that they don’t understand that:

  1. It is foolish to spend $10 when you earn only $8. It’s simple mathematics, and if you cannot add and subtract correctly, you’re going to be deeper and deeper in debt as the months go by.
  2. Budgets are good only if you follow them. Otherwise, it’s a waste of time to even set them in the first place.
  3. By using credit cards, you’re spending money that is not yours. It is borrowed from the bank and must be paid back, with considerable interest if you don’t repay within the specified time.
  4. By paying just the minimum balance on your credit card, you’re not building up good credit. Rather, the rest of your balance is accumulating and building up on the interest as well.
  5. Bills don’t disappear magically just because they are ignored. Rather, you have to pay more if you don’t pay them on time because of the interest, and you also risk the embarrassment of your services being disconnected.
  6. Saving money is an important habit that could literally save you in bad economic times. If you earn $10, save at least 50 cents as a matter of principle so that you get used to the habit.
  7. Buying something (especially something that you cannot afford and is very expensive) that is not really necessary is asinine, even if you’re doing it to impress your girlfriend or significant other, or to keep up with the Joneses. Unless you have the means to repay the amount you’ve charged to your card without breaking a sweat, it’s best to steer clear of frivolous expenditure.
  8. If you earn $10, you must know where each of those dollars has been spent. Not tracking your spending pattern is a financial mistake that could end up costing you dearly.
  9. You’re not rich just because you have multiple credit cards. Rather, the more cards you have, the more responsible you have to be. If you forget to pay even one balance, you’re paying much more than you have to because of the interest. So if you have more than one credit card, it’s best to set up a direct debit facility from your checking account to pay off your cards every month.
  10. It’s important to prioritize – if you’re not too flush with cash, it’s best to take care of your essential needs first. Pay off your mortgage, car loan, credit cards and your other bills in that order. You need a roof over your head, transportation, and food on the table. So think again before you charge a vacation to your credit card.

Good personal finance habits can be learned easily if you’re willing to effect a change in your lifestyle, one that will leave you with zero debts and a healthy bank balance.