It can take years to improve the financial health of your life. Making wrong and careless decisions can devastate the financial stability that you have built bit by bit with intense care, effort and sacrifice within a short period of time. To avoid burning a big hole in your pocket and save your personal finance, you must recognize the mistakes first and prevent yourself from committing them.

Financial mistakes that you should avoid by all means

Here are some devastating mistakes which can ruin your personal finances as well as your financial life so badly that you might never get back on your feet again.

Unnecessary borrowing and exorbitant spending

Credit cards are helpful; they provide and increase your buying capacity even if you don’t have cash in your pocket. However, they are helpful and really great until you can’t pay off the credit card balance by the end of each month. If you fail to pay off the balance, you’re likely to wind up wasting several hundred dollars making your creditor really wealthy and prosperous; but you will have nothing valuable to show.

Borrowing money through credit cards to keep up your extravagant buying habits and lavish lifestyle is an awesome way to become poor, as you might never end up paying for last month’s luxury. If you already owe debts, then you must stop using credit cards and make a strict strategy so that you can pay off outstanding debts as soon as possible. Use cash instead of credit cards while shopping. Control your buying temptation; you can surely pay off your debts smoothly.

Allowing bad practices to ruin your financial plan

Some people have a notion that a frugal life is an indication of a life of scarcity and so they often avoid it. In reality, frugality helps to control one’s buying habits. Every person should make a budget. A good budget encourages spending money for things that you actually need. Even after making a budget, people often don’t write down their daily expenses and as a result they waste hundreds of dollars for nothing.

If you want to buy something which is not included in your budget, take care of how much you’re spending for the stuff. It is true that making a budget is time-consuming and a daunting job. You may need bank statements, credit card bills and other bills to chalk out a financial plan. By doing that, you can find the black hole between your earnings and your expenses. Today at least 60% of all Americans spend much more than what they earn. If you keep a notebook in your wallet and maintain a list of your daily spending, you will be surprised by how your spending habits are eating up your hard-earned money.

Paying off a debt with another debt

This is another very bad habit that nowadays many Americans do. People often get trapped by the payday lenders or debt consolidation companies. They promise to help get you out of financial crisis, but in reality they can harm people and their credit ratings. Debts can’t be paid off completely by owing another debt; this is a misconception. A new debt is likely to make your financial condition even worse. Owing a new debt can only provide a short-term solution that simply doesn’t work long term.

If you’re really interested in building and maintaining a healthy financial life, you must avoid committing these mistakes. The bottom line is money saved is money earned. Start saving from today and live a debt-free life.

Jonny Pean is a renowned finance advisor. He works for as a senior finance editor.

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