Rahul made a lot of money mistakes. But he was smart enough to identify his mistakes and worked on them to get his finances back on track. Read on to know all about it.
We’ve all made a lot of money mistakes, especially in our 20s, haven’t we? We didn’t care about where and how we were spending our pocket money/income, didn’t give two hoots about our credit history/Credit Score, swiped our Credit Cards everywhere possible, never bothered to pay our bills on time, and what-not! As we aged, we began to realise these mistakes as they caught up with us and started being a burden.
Same was the case with Rahul Sharma, a 32-year old working as a software engineer in a reputed MNC in Bangalore. Luckily, Rahul identified the mistakes he made (and these are common ones that we all have made) and worked on them to get his finances back on track. Read on to know what these common mistakes are and how to recover from them.
Not Learning The Basics Of Money Management
When we are young we generally tend to ignore a lot of stuff. One of the many things we ignore is our finances. Rahul, too, ignored his finances. His reason was that he didn’t understand numbers. Whoa, seriously?
What did he do? Once his finances were in a mess, he realised that he needed to strike a balance between his expenses and his income. So, he started budgeting.
Although it was hard for him to stick to his budget initially, he gradually got the hang of it. This helped him to start saving money every month rather than living paycheck-to-paycheck and depending on his parents when he went broke.
BankBazaar Tip: The first step to a sound financial future is creating a budget. Start with a simple budget and stick to it no matter what.
Additional Reading: Money Management Tricks That Make The Rich Richer
Those Uncleared Credit Card bills
Although you would have got yourself a Credit Card to help you with your expenses, there’s a good chance you went a bit overboard with it, didn’t you? Well, Rahul used his Credit Card to buy the best smartphones and go on trips every weekend with his friends. And he never made full payments, ever! This basically led to high interest rates and a high outstanding amount on his card.
What did he do? On realising how much of an impact this had on his finances and Credit Score, Rahul charted out a plan to clear the outstanding on his card as soon as possible. He cut down his unnecessary expenses and started putting away the money towards clearing his card’s balance. Also, he refrained from using his Credit Card till he cleared the entire outstanding balance on it.
BankBazaar Tip: You cannot make the best use of your Credit Card if you keep rolling over Credit Card debt.
Not Giving Two Hoots About Your Credit Score
Your Credit Score and credit history have a significant impact on your financial life. A poor Credit Score means you’re likely to get turned down on loan and Credit Card applications in the future.
Just like you and us, Rahul didn’t bother to check his Credit Score and how his money habits were affecting it. It was only when he applied for a Car Loan and got turned down by several lenders because of a poor Credit Score that he realised the importance of maintaining good credit habits.
Because of this, he had to wait for almost three years to get his credit game up and then buy his dream car. Poor guy!
Additional Reading: 5 Ways To Raise Your Credit Score
What did he do? He started by paying his Credit Card dues in full and on time every month. This helped his Credit Score improve gradually.
BankBazaar Tip: Check your Credit Score, at least every quarter. You can get your Experian credit report in just three minutes and for free. Click here.
Living Life King-Size When You Can’t Afford It
One of the biggest mistakes that all 20-somethings make is spending more than they can afford. Rahul lived life king-size – pub-hopping, weekend parties, long drives, buying flagship smartphones, and more. His income was a meagre Rs. 30k and he used to spend around Rs. 45k to 50k every month.
What did he do? Rahul stopped spending on unnecessary things by creating a budget. This helped to balance his expense-to-income ratio.
BankBazaar Tip: Do not spend more than what you can afford. Also, always spend only after you’ve put away money for savings and paid all your bills.
It’s never too late to fix the money mistakes you’ve been making. Of course, it will take some time, dedication and patience. But just like Rahul, you’ll also be able to get over your rookie money mistakes.
Additional Reading: Follow These Simple Tips To Become Financially Independent
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