5 Biggest Money Mistakes to avoid in 2021

What are the 5 biggest financial mistakes to avoid in 2021? Are you making any money mistakes? How are these mistakes costing you? Do you know what you are losing? Every mistake costs you time. Time to reach your financial independence goal. Often, we do not even realize that the following below are mistakes. I do not blame you for that. After all, if schools have not focused on financial literacy, how are you to be blamed. But you are an independent person now. You can learn what you want now. You can choose to build your financial literacy and thereby coming close to your money goal, Your Rich Freedom. Let us head over to 5 Biggest Money Mistakes to avoid in 2021.

1. Taking debt to build liabilities.

Are you using your credit card frivolously without a second thought? I used to until I realized the amount I keep raking up on credit card debt every month.

When it comes to loan, let me take an example. Are you taking a loan to buy a car? Is your car generating cashflows or are you just going to use it? Be mindful that buying a car with debt means paying off interest as well as losing 40% of your car value in the first 2 years. Did you think of this before? I personally bought my first car with debt and learnt it the hardway.

I am not saying buying a car is bad. Having a vehicle brings in time and location freedom, which are irreplacable in terms of freedom. But overspending on a car when it adds no additional value is a financial mistake. A car was just an example, but the rule is the same for any liabilities. Buy only what you need!

Remember to only go for debt to build assets that bring money into your hands and not out of your hands.

2. Not saving and investing your paycheque.

Pay yourself first. How many times have you heard us say this? Are you doing it though?

If you invest your money in fixed deposits, the returns you will get is fixed. Especially during corona, a lot of banks have reduced their interest rates by 1 to 2 %. If you are lucky to get a 6% fixed return earlier, it is reduced to 4% now. Now, what about the yearly rise in the cost of living, a.k.a inflation? Are you really making any returns at all if we take risk-adjusted inflation rates?

Investing in stock or mutual funds looks ideal to get higher interest rates, but mind you, this is a risky bet. Please understand what is risky. Risky is when you invest money in anything without any knowledge. Doing something on a hunch and not by knowing, is the biggest risk you can take. Warren Buffet is a prime example of a person who has built his wealth by investing. He believes in this famous saying “Do not put all your eggs in the same basket” and I strongly abide by it. You too can do it but do not go at it blindly.

3. Not tracking your spending.

Do you have a budget? Do you know where your money is going? if you turn a blind eye to this, trust me from my personal experience, the money will just keep flowing out like water.

It takes conscious effort to build resistance to avoid spending unnecessarily. When you are able to identify when your money is getting spent in unnecessary areas, you will become conscious of your spending habit. This will help you consciously make a change and accelerate your path to your financial goal.

Sometimes, you may think that an expense(like buying bottled water) is small, so it’s okay to spend on it. But imagine there is a small expense like this every day in your 30 day month. How much does this add up to? If you spend 10 per day, it becomes 300. If you spend 100 per day, it becomes 3000. Small things add up, so be conscious of your spending habits or they will ensure that your wallet will start leaking without your notice.

4. Not having a financial plan.

I am the best example of this point. When I graduated, I knew I wanted to be wealthy but I did not have a plan. I did not have a tangible goal against which I could measure what I have actually done. But I knew I had to learn, this is when I started reading books, studying on the topic, and that is how I have to build my financial plan. I know where I want to be in 1 year, even in 5 years, 10 years, or even 50 years. I have a plan. If I am unable to reach my targets, I know I would have to change something in my life to achieve that.

I used my own example so that you would get how important it is to have a plan. I mean when you know you are going shopping, don’t you make a plan for the things you would want to buy? If you go to a restaurant, don’t you plan what you want to eat and then select your restaurant? So, should it not be the same even in the case of money? I’ll let you reflect on it.

5. Working on a dead-end job.

What is a dead-end job? When you will not grow in knowledge and wealth. In other words, your salary is way below market value, you are not getting any increments from years and you are not learning anything different. Why are you still there? What is a dead-end business? Are you making profits or losses? It makes sense if it’s a new business but if you are in the business for so long and are not able to generate profit or money, why are you still there? Either change something in the business or change your business.

Hope this article helped you understand the 5 Biggest Money Mistakes to avoid in 2021. I hope you will reflect on this and take action and change your future. Earn, Save, Invest, Grow wealth, and retire early and young. You can do it! Are there any other big financial mistakes that can haunt your financial future? We the community at your rich freedom would love to know more about it. Let us know in the comments below.

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