What is personal financial mismanagement
Published 06/08/2022 | Last updated on June 08, 2022
The mismanagement of personal finances occurs when we resort to loans with the bank or with a relative or friend at the end of the month when we receive our salary. We already have committed to the payment of credit installments. If we feel that our money is no longer enough, we must put our hands in our hearts and recognize if we are incurring lousy management.
Planning our finances is usually a complex issue, and few people have control over it. Poor management of our money can lead us to financial stress, having an impact not only on a personal level but also on the productivity of our company, as well as on a social level in the country.
A study by PWC (2020) reported that, in the United States, 34% of employees live paycheck to paycheck, and more than 51% expect to have to work at retirement age due to the need for resources. According to an analysis by Metlife (2019), overall, most U.S. employees indicate that their most significant cause of stress is money and financial issues.
What happens when we do not analyze our finances before spending?
When we do not analyze our finances before spending, we fall into disproportion and have debts that exceed our income. This imbalance generates economic problems, but the lack of compliance with some payments and the stress of making ends meet is detrimental to our health.
What are the causes of debt?
The causes of debt are the poor management of our income. If we did not spend more than we earn, our financial health would remain stable. Saving plays a fundamental role in covering eventualities that may occur at any time and, above all, achieving short and long-term goals.
What are the benefits of saving money?
The benefits of saving money are as follows:
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Achieving short and long-term goals.
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Having a healthy financial state.
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To count on the money to face extraordinary situations or emergencies.
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Achieving financial discipline in our lives.
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Do not resort to loans and do not get into debt.
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You will be able to invest and grow your patrimony.
Why start saving money today and not tomorrow or in two days?
Getting into the habit of saving has the objective of helping you take control of your money and your personal or business finances.
Just as we should control our health or our relationships, so should we be in control of our financial area. Even this one has a little more importance.
Whether we like it or not, the world is driven by money. It takes money both to pay for our basic needs to luxuries. Stop worrying about making ends meet and not knowing what you spent all your money on. And much more importantly, to prepare you for the current crisis.
We want to emphasize this last point because maybe you are thinking about saving to be able to survive in a time of crisis or lean times, but it is not about surviving the crisis but about living and coping with it without any problem.
Do you think you are a spendthrift?
Maybe there is something beyond that. We will tell you the 5 reasons why you have bad money management.
Your mind and money have a straightforward relationship. It was under this premise that this discipline is part of Neuroscience. Its main objective is the study of our decision-making by analyzing how we interact with money.
Thus, the leading theory is that one of the biggest mistakes in money management is to make decisions based on a trend, fashion, or the fact of following others.
5 reasons for poor money management
Although there is no proven theory that the brain's structure determines a person's success, the reality is that people who make rational decisions and do not follow others are the most successful.
Therefore, the basic premise dictates that the main mistake of people who buy irrationally is the tendency to follow others. Here are 5 reasons why you have poor financial management.
1. You don't analyze your shopping behavior
Especially in the decisions, you make regularly, that is, in those you make every certain period, such as the grocery pantry, for example. Maybe there are certain things that you buy out of inertia and not because you use them.
2. You do not accept your weaknesses
If you know that when you go to a shopping mall, you always end up with some shoes in your bag, even if you don't need them, don't visit that area or work on your willpower.
3. You don't know where your money goes
You don't have clarity between your expenses and income. Therefore, you often don't know how you will survive the rest of the month. You must compare your salary against your costs so that you don't get a surprise and then don't know where all your money is going.
4. You don't distinguish between whim and necessity
Do you need those designer shoes? Does your life depend on the latest expensive HD video game console with built-in speakers? We're not saying to deprive yourself of everything, but to distinguish between what is necessary (like paying your electric bill) and what is a whim.
5. You don't have an emergency fund
A small or large emergency fund for any unforeseen event will help you sleep better at night and save you from paying interest if you need an urgent loan. Just make sure that this emergency fund is in a financial instrument that will stand up to inflation and that you can withdraw it at any time.
At El Paisa Multiservices we want to help you with your finances in Hartford, CT. You can contact us if you have questions about our services.
By Ingenuity & Solutions
