“Because I don’t earn much, I can’t put anything aside.” This statement may be true for some people. But it’s not uncommon for ill-considered financial mistakes to put the brakes on wealth accumulation. Once you have accumulated enough, you have the means to try out the new online casino slots.
Everything should be different this month. This month, there should finally be some income left over: for saving, for bad times, or unforeseen expenses. And yet the account is empty again at the end of the month, even before the new salary arrives.
But why is it that some people simply don’t seem to succeed in building up assets, even though their income should allow them to do so? It could be due to unwise financial decisions, for example, which people are not always aware of, but which tear more or less large holes in the household budget. These financial mistakes that consumers often make when dealing with money, and how they can be avoided.
Mistake 1: Leaving money lying around without earning interest
Some people still hold on to the good old savings account and keep their money there. But this hardly earns any interest. “It makes more sense to start by saving a nest egg for unforeseen expenses in a call money account,” says economics professor Michael Heuser. A call money account earns more interest than a traditional savings account.
Once a nest egg has been saved up and all debts have been paid off, it makes sense to invest money that you don’t need, for example, in an equity fund, also in the form of a monthly savings plan. “It’s important to be well informed, compare offers from several providers and seek advice if in doubt,” says Heuser, who is Scientific Director of the German Institute for Capital Formation and Retirement Provision (DIVA). An investment in shares is worthwhile over decades and can generate substantial returns.
Mistake 2: Overdrawing your account
If your current account balance slips into the red, you can expect to pay horrendous fees and interest. “This can be expensive,” says Verena von Hugo, Chair of the Board of the German Alliance for Economic Education. If the overdraft limit is exceeded or the account is overdrawn without an agreed overdraft facility, the bank is even entitled to block the account.
Tip: “A budget book can help you to manage the money you have available and also keep track of your finances,” says von Hugo.
Mistake 3: Letting unused subscriptions continue
Anyone who has subscriptions to streaming services or magazines, for example, should review them at least once a year. Do I use them regularly enough to make a subscription worthwhile? “Some unused subscriptions are often only used again when the fee for them is debited from your account,” says Heuser. Simply letting unused subscriptions continue is a waste of money.
Mistake 4: Leasing a vehicle
Leasing is often not worthwhile for someone who plans to use a vehicle privately in the long term. “Although the monthly leasing rates are generally low, the bottom line is that you often end up paying more,” says von Hugo. For example, lessees are usually contractually obliged to adhere meticulously to service intervals, whereby maintenance must be carried out exclusively in authorized or partner workshops. This can be expensive.
In addition, the monthly leasing installments only give you the right to use the vehicle; you do not become the owner. According to the ADAC, leasing makes sense if you don’t plan on using a car for more than two, three, or four years.
