Financial crises is a difficult and uncertain time which overwhelms people and make them panic pushing them to poor decision making. People tend to make rather similar mistakes during such a time which are discussed in this article.
Not changing habits
Even though a financial crises makes many people reduce their expenses as much as possible, for the majority of individuals, this stage comes once they have already noticed a serious reduction in their budget. Prior to that point many people tend to live in the way they used to live even though such a lifestyle might not be affordable anymore. This usually happens since it is not thus simple for people to resign from their habits and start living in a different way.
Certainly, it is better to start minimising your expenses when you still have an opportunity to save and not to get into the budget left for a rainy day. It is also a high time to search for extra options for extra income if there is such an opportunity. Yet, you should not spend all of your energy into keeping your income on the same level so that you are able to live the same lifestyle. It is crucial to balance your habits and learn to resign from something at least for the time being.
Purchasing money right after the increase in its value
Once there is a notable increase in the value of foreign currency, many people decide to purchase it in order to earn money once it grows even more. This is certainly not sensible if you are going to do it during a crises.
At this moment, it is crucial to understand that the maximum value of foreign currency is notated right in the most intense phase of the crises. This means once it starts decreasing, the currency will start losing its value. As you can imagine, this can lead to money losses.
In addition to it, the rule for investment diversification is still working for the time of the crises as well. No matter what is going on in the world of economy, it is not recommended to change all of your finances in a single currency.
Making large purchases
One of the popular situations on the market during a crises is a decrease of the value of reality estate. Indeed, during this time you might be able to purchase a land or a flat for a rather small price. Still, it is not recommended to do such purchases unless you are really looking for a place to move out.
The reason for it is that quite often real estate tends to continue decreasing in its value even after the end of the crises. In such a way, you might not be able to sell your purchase soon in order to earn the money you hoped to get. At the same time, the prices of renting real estate can also be rather reduced so such a decision is risky. In all likelihood, you will just make your finances frozen in real estate.
Choosing a mode of total saving
Undoubtedly, everything depends on your current financial situation. If it is already rather poor, you might need to save as much as possible, however, many people just should rethink their expenses and resign from something while keep other expenses.
For example, resigning from purchasing goods which you can make do without right now whether it is a new car or clothes is certainly sensible. Yet, resigning from courses you have been attending in order to save money is not a good approach.
What worries me the most is that the money during the crisis is depleted by inflation