Things to Do to Avoid Some Serious Spending Mistakes

To spend , or not to spend? That is the question. Have you ever been on a spending spree, and when your credit card arrives, you realize you can't even pay the minimum requirement? Here are some things to avoid doing, in order to stop meaningless spending or at least reduce it.

1. Monthly expenses are beyond your income

You basically spend more than you earn, who pays for the excess? It is usually paid for by the credit card company or a bank. Who pays the interest on it? You do, and it is usually so high, that if left unchecked your debt just grows bigger.

What to do: Spend what you can pay for, any more than that should be off limits. If you're used to that kind of lifestyle then find a means to increase your income, or sell some things that you don't need. Determine what are needs and wants, and prioritize on the needs, and think hard before buying the wants.

2. Not paying off your entire credit card debt every month.

Monthly minimum payments make banks happy and you miserable. The banks are happy because they have the benefit of your paying high interest rates, sometimes even as high as 30% per annum, and you cannot afford that. That's what happens if you pay minimum all the time. So you should find a way to pay these high interest loans as soon as possible. Possibly get debt restructuring or a balance transfer with much lower interest rates, but make paying these types of debts a priority since they can really wreak havoc on your finances.

3. Financial blindness.

Some people make the mistake of not knowing where their finances are going. The way to fix this problem is to make a budget.

Basically list down all your existing debts and monthly expenses, be it for credit cards, car loans, home mortgages, utilities such as water, electricity, then add them all up. Subtract these expenses from your total monthly income and the result will give you an idea about where your finances are. This will also tell you whether you are living within your means are above it, and help you decide how to budget for the future.

4. More spending, more debts.

You're already in debt, and you continue to use your credit card like there's no tomorrow, the result is that you will never be out of debt. The solution is to stop using these credit cards, and keep just one for emergencies. Once again it boils down to identifying wants and needs. Before buying anything, think really hard on whether it is a want or a need. Maybe give yourself a day or two to ponder on any "impulse" purchase. Most probably this "impulse" will go away. Try to bargain before buying and wait for items to go on sale if possible.

5. No savings for a rainy day.
Ever heard of the one day millionaire? One who spends his million in a day. A lot of people usually act similarly. They get their monthly wage and spend every penny of it. Well this may be exaggerating, but some people use up all their money even before next payday. This is with no regard for emergencies, for sickness, or accidents. They also fail to see probable future expenses that may be costly, major car repairs, house repairs, etc... This would result in even more debt when these things, though unwelcome happen.

6. No retirement plan.

Pay yourself first. You worked hard for the money, so what's wrong with making your hard earned money work for you. Avoid spending everything with no regard for the future. Use the power of compounding, and put aside some of your income monthly. Before you know it you'll have a substantial nest egg that you can count on for your retirement.

Now can you the answer the question raised above? Hopefully you've answered the question wisely and correctly, and see a bright future for yourself.