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You might think that debt is quite rare. On the contrary, a vast percentage of people are in debt right now and struggling to get by. They are considering options like bankruptcy in the hope that they will be able to escape the situation that they have found themselves in. You might want to avoid this type of scenario for yourself. To guarantee that you don’t end up in this situation it’s important that you dodge some of the most common and dangerous financial mistakes floating around the market.
One Income
One of the first mistakes that you can make with your finances is trying to live on one income. Now, at first glance, you might think this sounds ridiculous. Surely, you only need one income to survive? Well, don’t be so sure because most economic experts suggest that you need at least two. This is true regardless of whether you are a single adult or you have a full family. You’ll still need to make sure that you have a primary income and a secondary income.
Don’t get the wrong idea here though. The second income doesn’t need to be as large as the first. It should just provide an additional cushion of cash to keep you comfortable or that you can use in emergencies. Essentially, what you’re looking for here is the perfect side hustle. It needs to be enjoyable and to not eat deep into your personal time. Believe it or not, this is a possibility and there are lots of options on the market. You can even explore passive income opportunities. Here, your money will work for you while you sit back and focus on other things in your life. The right secondary income can even dramatically improve your quality of life.
Living Beyond A Budget
Next, you do need to make sure that you are setting a living budget. Once you have enough money in your bank or your income is high enough, you might think that you’ll no longer need a budget. Don’t be so sure though because even the rich and famous tend to have budgets that they live on unless they have obscene levels of wealth. It’s vital that you have the income to cover the costs and the bills that come your way each month. So, how do you set a budget?
Well, you need to make sure that you are working out exactly how much you are earning on average each month. This should include any side hustles that you have already set up. Once you have this number, you can then think about all the bills and outgoings. This should cover everything that you can predict through the month and it’s important that you don’t miss out on any costs. For instance, if you are a freelancer, you need to include your business tax costs in this sum. When you subtract your outgoings from your monthly costs,, the amount that you have left is your budget to spend on what you want.
However, experts suggest that about half of this goes into savings. If you can’t afford half, try to save at least a hundred. This will ensure that you have at least some money to fall back on. Smart people have two sets of savings. One can be used to purchase long term luxury items. The second is used only in emergencies and should always be there in the event of a rainy day. If you ever have to use it, you should work to build it back up again over time.
Buying The Wrong Way
You have probably heard that you need to buy a property. Everyone is told this once they reach a certain age and perhaps it’s true. However, if you are investing in property, then you do need to make sure that you do it the right way. First, it’s important to consider the type of property that you are buying.
A big temptation will be to purchase a fixer-upper. Then, if you have the skills you can fix it up and flip it on the market. Be aware that this can be quite dangerous and you may end up in a situation where you have essentially purchased on a money pit. It will eat away at your finances leaving you with nothing. That’s why if you are buying a fixer-upper, you must consider it carefully. Ensure that you complete the right surveys to ensure that the property is financially viable. A new build will always be safer with lower risk and less chance of massive profits.
When you do find a property that you like make sure that you use a mortgage calculator. This will tell you how much you need to save for a deposit and how much you can expect to pay per month. Make sure that the monthly cost of your home does fit into the budget that we mentioned previously. Remember, it’s always going to be harder to afford a home if you are a single individual.
If you are single, you might want to explore other options on the market. There are different investment possibilities that could be more beneficial. For instance, you might want to consider investing in stocks. By investing in stocks, you will be taking on less risk than the property will typically bring. You can also guarantee that your investments are far more manageable and easy to understand. When you do choose an investment like this, it’s important to complete the right research. You also need to ensure that you are getting the best advice. That’s why we recommend that you do contact a broker. They will be able to set you on the right path.
We hope this helps you understand everything that you need to know about the common financial mistakes that people do often make. If you take the right action here, you can guarantee that you are in a stronger position with your finances and you won’t have to worry about an imminent disaster.
