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"Common Financial Mistakes People Do"

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Money will always be a problem for most people, a problem for the rich, and even more for the poor. The reason is simply that because we are often taught that money is evil from very early age, and most of us simply don't have enough financial educations.

It is an irony how something so essential, even being the center pillar of most people's lives is also one of the most misunderstood ones.

Thus, in this article, we list some of the most common financial mistakes people make, and how to avoid it. These seemingly innocent mistakes can, and have led many lives into major economic collapse.

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Without further ado, here are the top financial mistakes people make:

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1. Living Paycheck to Paycheck

The U.S. only has a household savings rate of 6.20%. Only slightly more than 6% of U.S. households earning go to saving. This can translate to, when something happened and you lose your job, you can roughly live with only 6% of your usual monthly budget to sustain yourself for an indefinite time.

Having a personal saving is important, but most people won't realize it until a disaster came. However, people in Asia apparently understands this better, with an average savings rate of Asian countries can exceed 40%.

2. Too Many Payments and Excessive Spending

Are all your bills necessary? The answer will most probably be a no. It will be different for everyone, but most of us have those items we don't really need that we pay every month. It can be cable TV subscription, radio, video games, and even more expensive items like gadgets and cellphones as well as designer bags.

Have you ever realized that just $20 of dining expenses per week could translate to $1,040 a year. Or how buying coffee from Starbucks instead of making your own every day can translate to a spending of hundreds of Dollars every year.

3. Spending On a New Car

Very few of us can afford to buy a car in cash, and most of us failed to realize that being able to afford the car payment each month is not the same as being able to afford the car, thus, we are essentially borrowing money with an interest.

It's not saying that you shouldn't buy a car, but paying for your monthly car installments, as well as paying for gas and insurance can be a heavy burden for your finances. Used cars and less expensive cars can be a more wise option.

4. Home Refinancing

Your home equity is not a piggy bank, and can cost you a lot of interests and fees. A house is a way to build equity, don't pay for it more that it's worth.

Bottom Line

All four common mistakes point to one thing: the consumptive behavior. However, switching your mentality from a spender to a saver is definitely an easier thing to say than being done.

It will take practice and a change of mindset to achieve your financial goals. But the first step is, after all, realizing your mistakes.