Top 5 Budgeting Mistakes to Detect and Fix

Mistake #1. Lack of clear financial goals

A clear understanding of what the savings should be and why, arises only when you yourself realize what you want to achieve and after what time. Let’s say you want to buy an apartment for 5 million rubles in five years. Or save up in ten years to educate a child, which will cost you 250 thousand rubles per semester. Or every three years to change the car, adding at the same time to the proceeds for the old car money a million and a half from their own funds.

Let’s consider the third option. It means that every three years you will need 1,5 million rubles. If you use the simplest financial instruments – for example, deposits that give a maximum return on inflation, then once a month you will have to save 42 thousand rubles (1 rubles divided by 500 months, we get 000 thousand rubles).

If you can’t save the required amount, then you need savings. And so you can calculate the steps for each of your goals.

Mistake #2. Savings due to important

Very often we begin to save on food, rest, our own development, leisure and health, which ultimately can lead to a psychological breakdown: “I deny myself everything, when will I live normally!” In fact, you need to start saving with financial methods. What to do?

• assess whether you qualify for tax deductions;
• find out if you are eligible for benefits and benefits;
• determine if you are eligible for maternity capital to reduce the cost of educating children and / or improving housing conditions at the expense of it;
• if you have loans, find out if they can be refinanced at a lower interest rate or combined into one longer loan at a lower interest rate to reduce monthly payments;
• analyze all your assets: maybe you have those that bring you nothing. For example, it may be old equipment that can be sold; land on which no one will build anything. Or you just have an amount in your nightstand that you can invest at least in bonds of reliable companies and have about 6% per annum or more – and if you buy them on an individual investment account with tax benefits, then due to the deduction, the yield will be even higher;
• evaluate all your bank cards: maybe you have unnecessary ones, for the service of which you also pay. You may be able to replace them with cards with interest on the balance and / or with cashback to fit your spending structure.

Mistake #3. Lack of insurance and stash for unforeseen expenses

If you don’t have any emergency savings, this can lead to non-systemic loans: just that – you need money, and you use credit cards and take out personal loans.

This drives you into debt, and there is even less free money. So ideally, you need to have a stash on the deposit in the amount that can cover the family’s expenses for three months.

In addition, if something happens to your property or health, if you need urgent and large expenses, if you do not have risk protection, then you will have to borrow money again. And this will only aggravate your financial situation.

Mistake #4. Distrust in financial instruments

Many do not put anything aside, thinking like this: “A default will happen anyway, the bank will go bankrupt, and the ruble will fall, so there is no point in saving.” The result is allegedly a foregone conclusion, and all efforts come to naught.

But in fact, the Russian financial market has tools that allow you to invest in companies in other countries (which eliminates the risks of instability in our country) and in different currencies (which eliminates the risks of ruble instability).

For example, these are exchange-traded investment funds or shares of foreign companies on the Moscow Stock Exchange or the St. Petersburg Stock Exchange. And these tools can be used even if you have $1 in your pocket.

Mistake #5. Belief that someone else will decide everything for you

There is also banal infantilism: it “turns on” if you relieve yourself of financial responsibility for your future and think that the state will give you a brilliant higher education, help you solve medical problems and provide a decent pension, which is enough to do not deny yourself.

But the state provides the bare minimum. If this is enough for you, then the question is removed: you can continue to spend everything clean. However, if you want a bright future for yourself and your loved ones, then you will have to take responsibility for yourself and start investing in your dreams and goals.