While personal finance strategies can vary based on individual circumstances, here are some personal finance mistakes you should try to steer clear of in 2024.
Not making a budget: The most common mistake people make is that they don’t closely track their inflows and outflows. Often, this can lead to mismanaged finances. So, establishing a realistic budget that includes all your income, expenses, and savings goals, should be the first key step for your financial plan. You must regularly review and adjust your budget as needed. A good thumb rule is to spend 50% of your income on necessities, 30% on wants and invest 20% of your income.
Overspending: Despite making a budget, it is not uncommon for people to end up spending more than what they can afford. The prevalence of online shopping and easy access to credit has contributed to a culture of overspending and impulse buying. Uncontrolled spending habits can lead to unnecessary debt and put you off track from your financial goals.
In 2024, practice mindful spending. Differentiate between needs and wants. Avoid making impulsive purchases. Before buying something, take time to evaluate its necessity and affordability. Consider implementing a waiting period, such as 24 hours, before making non-essential purchases to avoid impulse buying.
Not planning for rainy day: Aim to have at least 3-6 months’ worth of living expenses saved in an easily accessible account. This fund serves as a financial safety net in case of unexpected expenses or job loss. Emergency fund creation should typically be your first financial goal on starting a career.
Retirement plan: You can have the best-paying job, but whatever be your profession, all of us have to face retirement at some point or the other. So, not planning for retirement can be a big mistake. Start saving for retirement as early as possible. Start a retirement plan by investing in mutual funds or pension plans issued by life insurance companies. Start early to allow the power of compounding to work in your favour. Longer term of investment is more important that investing larger amounts since compounding will work wonders for your portfolio.
High-interest debt: Focus on paying off high-interest debt first. Consider creating a debt repayment plan and avoid accumulating new debt. Avoid credit card debt and do not take loans for purchases you can do without.
Delaying investments: Not investing early or delaying your investments can also be a costly mistake. Disciplined investing is the only way one can beat inflation, which keeps eroding one’s purchasing power on an annual basis. But you must do your homework or take professional advice when starting your investment journey. Learn about different investment options and create a diversified investment portfolio aligned with your financial goals and risk tolerance. In 2024, educate yourself about different investment options and start investing based on your risk tolerance and goals. Consider a diversified portfolio of stocks, bonds, mutual funds, or exchange-traded funds (ETFs). Financial planning should be undertaken at the beginning of your financial journey and reviewed periodically. Avoid transaction-based investments based on friendly neighbourhood advise or social media chatter.
