Five Financial Mistakes That Will Cost You Big

To ensure you are successful in your financial journey, watch out for these five mistakes.

Having No Goals

In terms of money, where do you want to be in ten years? How about a period of 20 years? You won’t be able to come up with a savings strategy if you don’t have a goal, which means your money will be flying out the door for costs rather than quietly earning you thousands of Francs in maturing assets.

You can do incredible things if you set sensible financial objectives and have a plan to attain them. Maybe you want to be a millionaire in 30 years, or you want to have enough money saved for a down payment on a house in five years.

What are your long-term, medium-term, and short-term goals: for yourself and your family? Make and set objectives for yourself so that your money can help you live your best life.

Keeping all your money in savings

Your bank will adore you if you put all of your money in a savings account, but inflation will eat away at that money until you have nothing left. Because long-term inflation averages around 3%, you’ll need to produce at least a 3% return on your money simply to break even.

And it’s reasonable to claim that there isn’t a single savings account that offers 3% interest.

Keep only enough cash in your checking account to cover your bills and avoid overdrafts, and only enough money in your savings account to handle emergencies (perhaps with an online-only bank, which will pay far more in interest). Then put the remaining into a retirement account or further investments. Investments can earn you a better profit margin thanks to the benefits of compound interests.

Spending Without A Budget

Whether it’s expensive jewellery or the latest smartphone, it’s easy to slip into the trap of wanting more than you can afford. Without a budget, lifestyle costs may eat away at your potential savings, and you would not even notice.

Get a sense of how much you spend in a month. You will soon notice how much those little expenditures you do not put much thought into really are when they accrue. You need to be disciplined, drawing up a budget with the aid of an honest scale of preference.

“A budget protects your savings from lifestyle costs.”

Sharing Sensitive Financial Details with Others

Did you know that under some banking regulations, even couples are not permitted to use each other’s debit or credit cards to withdraw money from ATMs or shops? The point is that you should never reveal your online banking information, passwords, ATM pins, debit/credit card information, or any personal information with anyone. You should also carefully manage them and access information in a secure location. Similarly, you should keep data relating to your investments, e-wallet, and so on secure and hidden from everyone. Any lapse in this area might result in abuse and serious losses.

Not Building a Sufficient Contingency Fund

Another area that may cost you a lot of money is the practice of not having a large enough emergency fund in place. When Covid-19 struck unexpectedly, a lot of people lost their jobs and a lot more have been particularly badly affected by the lack of an emergency reserve.

A contingency fund is a reserve that may be used to cover necessary costs in the event of a financial emergency. Store at least three to six months’ worth of spending in safe and conveniently available assets.

BONUS: Insurance Mistakes

A lot of people disregard the importance of insurance purchases, believing that they are frivolous expenditures. However, appropriate insurance coverage is a must if you want to protect your (and those dependent on you) finances from the effects of unplanned crises. In the absence of health insurance coverage, for example, if you or any of your family members require hospitalisation, the medical expenditures might quickly devastate your family’s finances.

Similarly, if a family’s breadwinner is involved in an accident or dies unexpectedly, the dependents’ financial future may be jeopardised if the breadwinner does not have appropriate life insurance cover.