Families that know how to make, manage, invest, and spend their finances are more likely to lead a comfortable and successful life. In contrast, families that lack these skills also lack a solid foundation for success, and as a result, these families don’t have enough finances to live or retire comfortably.
Without further ado, let us look at the seven common mistakes families tend to make with finances.
Spending More Than They Can Afford
One of the quickest paths to financial ruin is spending more than you can afford. Some families do this to emulate a particular lifestyle-; say the one they see in their neighborhood. According to Investopedia, a credit score of below 600 indicates that you live beyond your means. According to financial experts like http://jameseakin.nm.com, the best way to attain financial stability is to keep your expenses below 60% of your income.
Over relying on Credit
Most families use credit cards because of the convenience and security they provide. The downside of over-relying on credit cards is that they promote impulsive buying. Knowing this, families should always opt for cash transactions, and they should also spend within their daily limits.
Failing to Have Life Insurance
Having the wrong life insurance plan or having no life insurance plan can cause many headaches when you or one of your kin suffers a medical emergency. It would be best to assess the different medical scenarios that are likely to arise within your family before getting a health or life insurance plan.
Failing to Budget
Every family should have a budget because it will allow the members to assess their present financial situation. With a budget, families can adequately plan for expected bills, unexpected emergencies, and retirement. Yes, you might discover that your family’s budget constricts your spending, but adhering to it will prevent accruing excessive debt.
Absence of A Retirement Plan
Failure to plan for retirement is one of the biggest mistakes that families make. Families that fail to plan for retirement can’t realize dreams such as cruising around the world, enjoying dream holiday vacations, or living a particular lifestyle. A retirement plan allows families to create realistic goals for the future, and it outlines the steps that need to be followed in the present to achieve the set goals.
Delaying to Save For Their Kids’ College Education
The cost of college tuition in America is skyrocketing almost 800% faster than wages. In 1989, the average cost of an undergrad degree in a four-year institution was $52,892 after accounting for inflation. By the end of the 2016 academic year, parents paid $104,480 for a similar degree program. Therefore, parents who delay saving for their kids’ college education end up spending the hard-earned finances they could have invested in their kid’s college education.
Setting the Wrong Financial Example for Their Children
Are you setting the right financial example for your kids? Children subconsciously take up most of their financial habits from their parents, regardless of age. Parents who make several online purchases using credit cards, pay their bills late, and accumulate large debts are setting the wrong example for their kids. When it comes to finances, older family members can set the right financial example by setting priorities or taming their spending habits.
Start Making the Right Choices with Your Family’s Finances Today
Just about everyone can agree on one thing: financial education is essential. It equips individuals with the necessary knowledge and skills needed to make well-informed financial decisions. Unfortunately, most of us do not understand how money works, and this is why achieving financial goals can seem impossible-; even within the family setting. To achieve financial freedom, also remember to avoid the seven common mistakes families tend to make with finances.