Here’s how you can avoid some common money mistakes in the New Year

livemint.com:

Not making a budget: The most common mistake people make is that they don’t closely track their inflows and outflows. Often, this can lead to mismanaged finances. So, establishing a realistic budget that includes all your income, expenses, and savings goals, should be the first key step for your financial plan.

You must regularly review and adjust your budget as needed. A good thumb rule is to spend 50% of your income on necessities, 30% on wants and invest 20% of your income. Overspending: Despite making a budget, it is not uncommon for people to end up spending more than what they can afford.

The prevalence of online shopping and easy access to credit has contributed to a culture of overspending and impulse buying. Uncontrolled spending habits can lead to unnecessary debt and put you off track from your financial goals. In 2024, practice mindful spending.

Differentiate between needs and wants. Avoid making impulsive purchases. Before buying something, take time to evaluate its necessity and affordability.

Consider implementing a waiting period, such as 24 hours, before making non-essential purchases to avoid impulse buying. Not planning for rainy day: Aim to have at least 3-6 months’ worth of living expenses saved in an easily accessible account. This fund serves as a financial safety net in case of unexpected expenses or job loss.

Emergency fund creation should typically be your first financial goal on starting a career. Retirement plan: You can have the best-paying job, but whatever be your profession, all of us have to face retirement at some point or the other. So, not planning for retirement can be a big mistake.