Money & Mistakes I

A financial health study by Wells Fargo revealed that 44% of people would rather discuss death, religion or their health than their financial situation.

Now this figure is valid for the US and it’s even higher in the german speaking part of Europe, where for instance the monthly salary is kept very private even among longtime friends.

For Romania, this figure is considerably lower – I can’t proof this for sure, but I can very well compare between Western Europe and Romania.

This different behavior may have one simple reason: It’s much harder to confess ‘ich habe kein Geld’ in a rich country where everyone else seems to do well, than to say ‘n-avem bani’ in Romania, where you can assume you’re by far not the only one without enough money.

Well, that’s it with the differences. When it comes to missteps regarding personal finances, spending or saving money – a lot of people make the same mistakes, whether they live in Boston, Berlin or Bucharest.

Here is the first part of 10 widespread money-mistakes

1. Sign contracts you don’t fully understand

Everyone who understood with 100% certainty their mortgage-papers or loan-contract can jump to the next section. For those who didn’t – just be aware of this. For your counterpart, the bank, a credit is lucrative business and you’re dealing with professional moneymakers. Prepare yourself as you would for a tennis match vs Simona Halep. Research the web for potential traps, compare offers and learn to calculate interest rates. Just one tip: It’s better to pay a higher rata for a shorter period than a lower rata over a longer time.

2. Counting on the state ability to fulfill the promise to future pensioners.

That does not mean, you will receive no pensie at all, but I can guarantee you, that over the next decade or so, Romanians will face the decision to work considerably longer or have to accept an even smaller pensie. The demographics just lets no other choice. The only way out of this dilemma, is a long term private investment strategy, as proposed in chapter 21 for instance.

3. Don’t budget your expenses

I know an older and she regularly asked me to do the shopping for her. I didn’t had to check the calendar, I could tell by her shopping-list the week of the month we’re in. Week 1 contained friptura, branza, legume, and dulce. Week 2 orez, pasta and cartofi. Week 3 zacusca and paine feliat. In week 4, she didn’t asked for a shopping tour at all.
I guess you get my point. A cautious calculated (and respected) monthly budget would help not only the lady. Without an accurate picture of where and how money is spent, it’s impossible to make solid financial decisions.

4. To ignore emergencies

An emergency fund is the foundation of financial well-being. Why? If you don’t have the ability to cover an unexpected expense without selling something or piling up debt, it’s hard to maintain a solid financial situation. And expect unexpected expenses anytime.

5. I want it all – and I want it now

A line from a ‘Queen’-song I like. You should listen to it, you will enjoy; but if you follow that advice as a consumer of fancy products, you will regret. Simple, but golden rule: If you can’t buy it in cash, you can’t afford it at all. Shops may ‘help’ you to buy nonetheless with 0%-dobanda offers. Be careful, these products may be outdated or pushed for clearance (you won’t find an iphone 6s with 0% dobanda, will you?) and are thereby not worth the money anymore.

If you found something in this section worth thinking about, give it a try. Find five other mistakes that prevent you from financial independence in the next chapter:

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