Financial blind spots can make your situation a lot more challenging than it already is. The problem is that they are not easy to identify. And for some people, it is usually too late in the game when they figure out where they made a mistake. This is one of the main reasons why it pays to know your blind spots before they catch up on you.
Just like when you are on the road driving a car, knowing your blind spots can give you the opportunity to make the necessary adjustments. It helps you change your view and give you the chance to see your blind spots before you get into an accident. It can be a motorcycle that can quickly creep up or even a speeding car that you miss in your side mirror.
The same idea goes for your finances where you need to identify potential financial blind spots to give you the chance to avoid financial problems along the way. You may never be able to eliminate all of them. But this should not stop you from looking at them, identifying specific situations, and understanding what you can do to get ahead of the issue.
It could be a lot more challenging to manage your finances now primarily because of the health crisis. It could have made an impact on your income and you are still in the process of getting your finances back up. WHO shared that about 1.65 billion global workforce were at risk of losing their livelihood. If that is the case, the more you need to identify your money blind spots to help you manage your finances better.
One of the most common financial blind spots for a lot of people has to do with the way they pay their bills. If you have been paying bills first and saving what is left after then you need to seriously look into this habit. This is what is called a reactive action where you postpone your savings after you have paid your bills.
You need to be more proactive with your approach when it comes to saving money. This means prioritizing your savings before your bills. Taking on this approach means you have to carefully track your spending each month. You need to plan ahead so know how much your bills will be at the end of every month.
Doing so will help you put money towards your savings first before paying your bills. This helps you save money better and forces you to manage your expenses every month. If not, you could end up short on your payments and choose to dip into your savings. When this happens, you are back to where you started from.
Failing to plan
If you fail to plan, then you are planning to fail. Financial blind spots can also be a result of inaction. Much like how the health crisis underscored the importance of saving up for a rainy day. Plenty of Americans found themselves dipping into their restricted funds just to get by. Others were even forced to take out and borrow high-interest loans to make ends meet.
This is where forward planning and setting money aside for emergency situations come in. If you were not able to do that in the past, now is the best time to get started. You could argue that it is not an easy time to set aside funds for emergencies. But the idea when you are just starting out is creating a sustainable habit.
This means that you can set aside a small amount when you are just starting to build up your reserve fund. Once you get that hang of it, you will find it easier to save money in the future. The goal is to create that habit first of saving money every month. Soon, you will notice that you are setting money aside instinctively.
Foregoing financial basics
You always need to go back to financial basics. This is true especially if times get tough. This is one of the financial blind spots for a lot of people who are trying to manage their finances. You could get caught up with a complicated household budget you believe will work better. But you end up spending more time trying to understand how it works.
You might even begin to put investments in industries you barely comprehend only because it promises you huge returns. In the end, you could lose money and never understand where it all went. This is the reason why you need to stick to or learn the basics first. As you progress, you can slowly try a more complicated budgeting system or a new investment venture. But you always need to ground your decisions on basic knowledge.
Financial blind spots can also come from habits you have formed over the years. And putting off for tomorrow what you can do today is one of the most damaging habits you need to change now. If you took this approach for your emergency fund and the health crisis came, you would not have any savings to use. This is important as CNBC shares that only about 39% of Americans can pay for a $1,000 emergency.
The same goes for other areas in your finances. You need to accomplish what you can do today. Keep in mind as well that procrastination is not similar to proper planning. There are financial decisions that you cannot rush into. When it comes to your money, you always need to make a calculated move based on informed money decisions.
Just because you qualify for a home loan now does not mean you will take out that loan now. What about money for a down payment? Have you checked your credit score? Are you going to take in Private Mortgage Insurance? You can wait and plan for it which is totally different from procrastination. Plan accordingly but act on your plans according to the schedule you have set.
Focusing on the molehill
Financial blind spots can be a result of putting too much attention on the smallest things in your finances. It is good to be conscious of the interest you are paying for your credit card expenses. But if that takes you away from the fact that you need to rein in your impulsive purchases with your card, then your balances will start to balloon as you focus on the wrong things.
Make sure that you take care of the big items in your list first before you dive into the nitty-gritty of your finances. This way, you are assured that they will not be left unattended. Once that happens, you might have a tougher time with your finances.
Doing everything all at the same time
Coming off from the pandemic, you might start to believe that the more you work, the better off you will be. As a result, you look and take on as much work as you can just to bring in a bigger income into your budget. But sooner or later, you will start to feel how it takes a toll on your body. This is because you have already stretched yourself out too thinly.
You need to make sure that you are able to balance and manage your time as well. It is not possible to spend every waking minute working. You need to have time for rest. This does not only help your body but your mental health as well. You need to make sure that you take care of both because you will need them as you manage your finances.
There are plenty of financial blind spots you need to keep your lookout for when you are trying to build your finances back up. It helps to identify them early to lower the challenges you have to deal with.