The whole world has seen what would happen if the world just shut down. Panic hit everywhere. Markets crashed. Kids couldn’t even attend their high school graduations.
You were one of two types of people. You either kept your job. You either lost your job. Regardless of either position. Were you prepared? Or did you make one of these 6 major financial mistakes?
Not Having an Emergency Fund
This is one that should be common sense. You have one or you didn’t. If you don’t, then you will want to make one. You can find out how-to here. Everyone needs a sense of security.
You never know when you may get laid off. There could be a medical emergency. What if your car broke down? There are many reasons to have one. $1,000 is a good starting point. That could bail you out or at least help out.
Not Having a Budget
Not having a budget can lead to a disaster in general. If you do have a budget and don’t adjust for these situations it can be as bad. So you need to have one set in place.
Think of your budget as a museum guide. It guides you through the world of finances. It’s there to prevent you from spending money on things you don’t need to spend money on. The less you spend the more you save.
Make sure to adjust your budget toward your situation. With everyone on lockdown, you may be spending less money on gas. You may be eating more and using more electricity though.
Something always is coming up. Make sure you adjust for any changes that may happen. Keep track of what you are spending money on at all times.
Going at it Alone
Sometimes it’s uncomfortable talking about your finances. I mean not everyone can afford a financial advisor. It’s always good to have someone hold you accountable.
Do you have a good friend or family member that is good with finances? Ask them and see if they can help. I needed help at one point in my life. My best friend stepped in and saved me.
If you need help, never be afraid to ask. It’s less painful than that feeling of financial drowning.
401k Plans
So a recession or a pandemic of some sort happens. The stock market crashes. What is your first instinct? To check your 401K.
I know it’s kind of hard to do, but don’t. You’ll make yourself sick doing this. Remember, the market goes up and down. It always recovers.
Constantly checking your brokerage is going to put yourself into a frenzy. You may make the next huge mistake if you do.
Selling Your Stocks
It’s true there have been some of the largest dips in the stock market in recent history. The other side is there have been some of the largest climbs. So HODL (Hold On for Dear Life).
If you panic and sell when they are done, you will miss out on the gains after it climbs back up. Unless you are a day trader, you are more than likely in it for the long haul.
So don’t panic and sell. No one is psychic and can tell when the market will soar or crash. If it does crash and you have the spare you should buy more. If you need the cash, there is no shame in selling.
This also applies to the cryptocurrency markets and ETFs. If you don’t know what ETFs click here to learn about them.
Non-Diverse Portfolio
The idea behind having diversity in your portfolio is this. You want to have a mixture of different types of investments. These would be ETFs, Cash Investments, Bonds, and Stocks.
Here is the reason why they need to be diversified. All investments have a direct effect on others. An example is if the market takes a dip, Bonds and Cash Investments can go up. You aren’t taking a hit here.
If all of your money is solely invested in the stock market, you could be in some trouble. Spreading out the types of investments you own is vital. Diversity is where it is at.
There you go. The 6 mistakes most people make. Remember the idea here is to remain calm if something does happen here. Have an Emergency Fund. Diversify your investments and HODL. ‘Till next time!!!
