10 Financial Mistakes That Can Make You Poor

Many people around the world find themselves struggling with debt on a daily basis. The recession has shed light on how poorly many people manage their finances. Debt, decreased savings and increased expenditures are some of the pitfalls that can seriously derail your finances. Avoiding these mistakes can make a huge difference in terms of financial

security

. It’s true that, when it comes to money, we all make mistakes. Our personal finance lessons are often learned through experience. However, it is important to realize the mistake and prevent it from happening again. Here we have gathered 10 of the most common mistakes made in personal finances; avoiding these errors can help you build financial security.This is the cornerstone of personal finance, regardless of your income or net worth. It doesn’t matter how much you earn, but if you live within your means, you can save money in long term. It is simple math: income < expenses = debt, while income > expenses = surplus. Although buying a couple of things here and there might not seem to have much significance, it can make a huge impact over time. Frivolous expense such as ordering out for lunch or dinner or going to movies at peak time can add up and drain your bank account. Ideally, you should save and invest a percentage of each paycheck or income source you have.One of the main reasons behind frivolous spending is not having set a budget. A monthly financial budget helps you calculate how much you are supposed to spend in the entire month. It is calculated by considering your total income, your fixed monthly expenses, debts and any other liabilities. Your monthly budget should also take into consideration the amount you should be saving for retirement or a rainy day. Once the monthly budget is set, you can spend accordingly.Most young people think that retirement is simply too far away, so they can think of retirement savings later on. Actually, people grossly underestimate the true cost of retirement, and when and how much they should start saving.