My mom passed away two years back. Over the past two years, I have had tough times but it helped me to get practical knowledge on finance, banking, household, and so on. Along the way, I made mistakes and learned a lesson from them as well. There were ups and downs throughout the journey, but it built confidence in me, and I hope it'll help me to have smooth financial years in the future.
I found, mistakes can teach you a lot, and if you can grasp the lessons, you’ll not repeat the same mistake in the long run. So, you must try to learn from every situation in your life. Think carefully, you must have learned some financial lessons in 2015. If those lessons were from mistakes, then you shouldn’t repeat the same in future. Here I’m sharing some lessons that I learned over the last year. I hope my lessons will help you to manage your own personal finance.
If you spend money on everything without doing the calculation, then you may end up with zero savings. At the very beginning of the year 2015, I didn't pay attention to budgeting. I didn’t have any budgeting plan, and I noticed at the end of the year I had no money in my bank account and my student loan interest was still unpaid. Then I determined to craft a budget based on my monthly income. At first, I faced some hurdles, but with time, it became easier to manage. Now, I can manage every household costs as well as the financial obligation with the same amount of my income and I can even save a certain amount of money from my income as well.
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I learned this lesson long back when I had chosen a luxurious car during my college time. I incurred a high amount of debt due to that car, and my mom struggled a lot to pay off the loan. From that day, I promised myself that I will not buy anything that I can’t afford. These days, buying an expensive item (car, house, vacation) becomes easier as you can borrow money for buying it. But, remember, the loan is something that you owe to someone else. It’s not your money that you owe, but someone else’s. If your income is limited and you’ve to pay off the loan amount that you owe, then try to live within your means.
When you approach the creditor to borrow money, apply for an insurance policy or simply for a new credit card, make sure you read all the terms and conditions before signing the agreement. My mom bought a medical insurance policy, which was completely useless and declined to cover the costs. They told us that the policy that we had would not cover this type of medical costs. Remember, there are many hidden clauses that they write in small in the terms and conditions section. You must read all the terms before making any decision to get the full advantage of the service.
“Debt is unhealthy”. It’s not your money that you owe, but creditor’s. So, you must pay off the debt as early as possible. Ignoring debts increase financial risk so you shouldn’t accumulate more debts. There are a lot of uncertainties, and the debts can put you in a lot of problems in life. This is really a very risky situation as you never know if your salary will permit you to pay off debt. You must try to pay off excess debts so that you can improve your credit reports fast and can manage your finances in the future.
Having a lot of debts can create many other troubles in your life. You may not be able to get the job you desire and also the car and the house you want. Your credit score should be good to fulfill these desires. Having debts will affect your credit rating a lot, and that can really pull down your score.
Using credit cards randomly can incur revolving credit card debt. So, you must use a credit card wisely. Try not to carry it so that you don’t even feel the urge of using it when you can’t afford to buy something with cash. Keep cash instead of credit card. Thus, you’ll be able to avoid overspending.
Remember, your every penny matters, after all, you work hard to earn that money. You’ll be surprised to know how much money you can save by shopping around. Most of the times, impulsive shopping results in overspending. We got (me and my mom) a great quote for our home insurance, but this year (2015) they are charging me very high rates. I bargained a lot with them but failed to convince them. So, over the last two months, I started to shop around and realize how much money we wasted over so many years! I switched off to the other company, and it charges significantly lower rates than the previous company. So, I’ll suggest you to shop around to get the best value for your money. So, it’s advisable to consider comparison shopping not only for insurance but also for cell phones, cable, other utility services, including online purchases.
My mom’s liver disease costs very high amount of money. Apart from the medical insurance, we had to pay a lot of money. I borrowed a big amount of loan to meet the costs, and it taught me the importance of an emergency fund. You must have it to meet the uncertain emergencies. Most of the time emergency forces us to borrow money from the lender. So, make sure you set aside a certain amount of money in your emergency fund to avoid the situation.
In a word, I learned that time is a great healer and a great teacher as well. I was broken-hearted over losing my mom and had so many responsibilities and issues to resolve. Finally, in the year 2015, I gained the confidence and learnt many financial lessons that help me to continue the journey. I hope many lessons are waiting for me. So, what lessons have you learned in 2015? Please share with me so that I can learn some new lessons from them as well.