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5 Tips on Recovering From Money Management Mistakes

5 Tips on Recovering From Money Management Mistakes
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Monday, 20 May 2019 06:58 AM Current | Bio | Archive

Money management mistakes are big setbacks and mostly emanate from poor decisions and choices.

Whether you’re an employee, business owner or investor, we are all prone to making money management mistakes. Studies show that a whopping 82% of businesses that fail do so because of cash flow problems.

On personal finance, data from the Federal Reserve show that Americans hold over $1 trillion in credit card debt ($1,023,000,000,000) while only 49% of Americans have a long-term financial plan in place, according to Capital One's Financial Freedom survey.

These stats simply reveal the implications of decisions and choices when managing business and personal finances. How can these mistakes be avoided? Here are 5 tips;

  1. Self-Awareness

According to Investopedia, among the top 10 most common financial mistakes are excessive/frivolous spending, never-ending payments, living on borrowed money, living paycheck to paycheck, not investing, paying off debt with savings and not having a plan.

One need to be aware of these money management mistakes before thinking of how to make amends. Take for instance, in a decision making process, a manager needs to identify the problems before devising alternative courses of actions to solve the problems. Hence, an employee, business owner or investor who is unaware or aware (but does nothing) that his/her actions, decisions and choices are inimical to his/her finances can hardly recover from financial mistakes.

Ensure you are aware of your predicaments and be financially discipline to curtail impulse shopping, excessive gambling, frivolous spending and unnecessary loans.

  1. Track your Business and Personal Finance

Financial independent and business success are attained when finances are adequately monitored and there are controls over expenditure. In business for instance, employees’ mistakes, frauds and wastages can put your organization into serious financial problem. While in personal finance, unbudgeted expenditure and excessive borrowing can get in to huge debts.

Overcoming these require deliberate action plans like consulting financial experts and mentors for advice, and utilizing finance management apps to constantly put a check to your daily expenses and monitor your business finances and resources. Money saved by being financially disciplined and installing measures to prevent mistakes, frauds and wastages are great wealth.

  1. Borrow Wisely

Unnecessary borrowing leads to inability to repay loans and debts accumulations. Data from the Federal Reserve shows that the U.S. consumer debt rose 4.5% to $4.046 trillion, of which $2.985 trillion was non-revolving debt, and it rose 4.9%. Credit card debt totaled $1.061 trillion, increasing 3.3%. Businesses are not left out in this context.

Be it personal or business finance, money management mistakes arise when taking loans without carefully understanding the implications and misuse of loans. For instance, using short term loan to finance long term project and carelessly embarking on frivolous expenses hence having a poor credit history.

Get yourself out of debts by analyzing several loan options before applying for loans. Borrow wisely by utilizing investment loans, real estate loans, equipment financing and bad credit loans to achieve your investment goals and improve your adverse credit history.

  1. Save and Invest More

One of the issues most Americans are contending with is inability to save. I guess you’ve heard that 4 in 10 Americans don’t have the funds to cover an unexpected $400 expense. Hope you’re not in this category of people? If you’re, examine your expenditure and make conscious effort to save. This will enable you to solve emergency issues and seek for investment opportunities.

It is somewhat not enough to save these days because inflation can make a mess of your monetary value. Seek opportunity to invest your money rather than saving it. But you have to achieve this by saving first.

  1. Have an Effective Financial Plan

Irrespective how huge your income or profits are, if you don’t have an effective financial plan, it’ll be difficult to adequately manage your money. Effective financial plan will assist you keep a check on excessive/frivolous spending, unnecessary borrowing, lack of investing and savings, debts accumulation and poor credit history.

It is important to set up an effective financial plan to assist you in achieving short and long-term goals. It also helps you to focus on set goals hence giving no room for unbudgeted expenditures.

It takes deliberate plans and effort to be successful financially. Mistakes in money management hardy occur when there is an effective plan in place.

Richard Agu is a researcher, entrepreneur and freelancer, passionate about entrepreneurship and self-development. Currently, Richard writes for Entrepreneur.com, Goodmenproject.com, among others. Follow him on Linkedin.com by clicking here now.
 

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RichardAgu
Money management mistakes are big setbacks and mostly emanate from poor decisions and choices.
money, management, mistakes
747
2019-58-20
Monday, 20 May 2019 06:58 AM
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