If you constantly feel stressed about money, it might be because you’re living on top of a financial cliff.
That’s because when it comes to money, simple mistakes can have serious consequences.
Some people seem to prefer to fail first before changing their approach, but that can be an expensive way to learn. Over time any financial mistakes can really compound.
Here are three financial cliff edges I see people living on all the time. If they hit a bit close to home, maybe it’s time to make a change in your life.
Financial cliff edge #1: Not having a budget
Whether you earn 30k a year or 300k, it’s crucial to have a clear understanding of how much money is coming in and going out. Then know exactly what’s left over to save, invest or pay off debt.
If you don’t have a budget, start one today. And while you’re at it, set some financial goals for the next few months. Or if you seriously want to move away from this particular financial cliff, set goals for the next few years or even decades.
It won’t take very long to put a budget and goals together and you’ll soon be making smarter, more informed decisions about your money.
Financial cliff edge #2: Living beyond your means
It’s easy to get carried away wanting everything at once. Credit cards are readily available and there are so many temptations in our busy day-to-day lives.
But the fact is, sooner or later living the high life will catch up with you. You need to stop spending money you don’t own.
If you’re racking up debt you can’t pay back, it’s time to have a serious think about things to compromise on to get back into the black. Cut back hard on your expenses and even look to earn extra money to help you out.
There are different strategies that can help you pay back your existing debts to move away from this financial cliff. Try the debt snowballing approach, but be sure to consolidate as much of your debt as you can first.
Financial cliff edge #3: Treating investing like gambling
As with the casino, people hoping to make a fast buck by speculating on the sharemarket will be sadly mistaken.
Common traps include borrowing too much to invest, putting all your money on ‘the next big thing’, or having a short-term outlook.
Investing isn’t a matter of choosing red or black. It involves taking long-term positions in assets you understand and enlisting professional help to guide your decisions.