Sometime during our lifetime we spend more than we planned, saved less than we should have or just made some horrible financial decisions. A few financial misfortunes here and there can add up to a lot of lost cash. Check out these common money mistakes and follow the advice to help put you on the path to a brighter financial future.
Money Mistake #1: No idea where your money is going.
What’s The fix? Making a budget is the best thing you can do to find out all the ways you are throwing away your money. At the end of the month you see you have spent $250 on fast food and $0 on paying down your high interest credit card then you need to make some spending adjustments.
Money Mistake #2: Not having an emergency fund.
What’s The Fix? Try and save a chunk of money in case something unexpected happens. It’s a good rule of thumb to have 3-6 months of expenses saved in case of an emergency. Set a goal and don’t stop saving until you hit your goal. If you’re not sure how much to save look at your monthly budget and figure out where you can cut to start saving for a rainy day.
Money Mistake #3: Waiting to save
What’s The Fix? Start saving NOW. Opening a retirement account in your 20s can potentially give you twice as much money as someone who starts one in there 30s.
My recommendation is to follow the Ten Cent Law. Take ten cents of every dollar you earn and put it in your savings account. It won’t be hard to Live on 90% of your income, and you’ll soon have a very nice nest egg.
Money Mistake #4: Using High-Interest Debt
What’s The Fix? If you are regularly overdrawing your checking account, using credit card advances or payday loans, you are essentially throwing your money away. Borrowing is OK, but those forms of debt are way to expensive. These forms of debt most always come when you have exhausted all other options.
Money Mistake #5: Paying off debts in the wrong order
Bigger balances on things like student loans and mortgages can seem overwhelming, but it’s the smaller credit card bills that can really hurt you.
What’s The Fix? Pay off the card whose balance is closest to its limit (having balances close to your limit lowers your credit score), and then start chipping away on the card with the highest interest rate. Also, refinance big-ticket balances (mortgage, etc.) to make payments a little more manageable.
Money Mistake #6: Spending money on items you could get for absolutely FREE
What’s The Fix? Did you know you can get music, books, magazines educational classes, book clubs, and even printing services at the local library? Just access their website and see what they have available. Also, get involved in a clothing swap, borrow from a friend instead of buying, and maybe talk a walk in the park or hike a national park instead of going to the mall. There are plenty of free options. You just need to find them.
Money Mistake #7: Buying NOW
If you MUST have things BEFORE you have money to cover them, you’ve fallen prey to the great American debt trap. Just look at interest charges – debt isn’t cheap.
What’s The Fix? Are you buying things before you have the money to pay for them? Remember, debt isn’t cheap. I believe in good things come to those who wait. I’m sure you’ve heard this before. If you can wait until later to buy that all important item and put money away to save for it, you won’t have to use high interest credit cards. That’s how you become debt free.
Money Mistake #8: Spending too much on housing
What’s The Fix? As we all know, it’s easy to spend way too much on housing. The rule of thumb is, you shouldn’t spend more than 30% of your income on housing. If that doesn’t work for you, living with parents or roommates is a perfect strategy. And, when you decide to move out on your own make sure your mortgage or rent do not put your long-term financial goals in jeopardy.
Financial mishaps are certainly a part of life but it is easy to recognize your mistakes and learn from them. Make it your goal to stop making these common money mistakes. In the end, your piggy bank will thank you.
Are You Making These Money Mistakes?
There are many money mistakes that could be costing you and you may not even realize that you are making them. If you continue making the same financial errors, you could end up with a financial disaster. Take a close look at your finances, figure out which mistakes you’re making, and then ensure you avoid making them in the future. You may be surprised by just how many of the following mistakes you’re guilty of when you look closely.
Mistake #1 – Not Saving Money for the Future
One of the biggest mistakes that people make when it comes to money is not saving money for the future. While you are young, it is difficult to find money to put away for the future, with all the bills, student loans, and other financial responsibilities that you may have. However, you cannot put off saving money. The earlier you begin to save, the more money you will have when you retire. Saving can also help you to avoid borrowing money, since you’ll have money put away that you can use if an emergency arises.
Mistake #2 – Failing to Comparison Shop
Another of the money mistakes you need to avoid is failing to comparison shop. Many people think that it is easier to stay with the same company or brand that they have been using for some time. However, you can waste a lot of money if you don’t compare prices. Begin comparing on gas prices, mortgage rates, electricity costs, car insurance costs, and the cost of products you buy and you will begin saving big time.
Mistake #3 – Borrowing Money at Interest Rates that are High
Borrowing money at interest rates that are high can be a big financial disaster waiting to happen as well. If you have to go into debt, going with low interest rates is important. It is imperative that you avoid accruing debt that has interest rates of 15-30%, which can add up extremely fast. Once you get into this type of debt, it is hard to ever work your way out because of the high interest rates.
Mistake #4 – Spending on Impulse
You would be amazed at the money people spend on impulse, which is a huge mistake. When you are bored or hungry, you should avoid going out shopping. Otherwise you’ll spend a lot of money on things you don’t really need or even want. When you do go shopping, ensure you make lists, know what you need, and know what you should avoid. Avoid making fast purchases on big items. If you really need them, come back again the next day. Then you’ll avoid spending on an impulse, which can get expensive fast and lead to a lot of debt.
Mistake #5 – Allowing Sales Techniques to Dictate Your Spending
Last, allowing sales techniques to dictate spending is another of the common money mistakes people make. Companies are smart and they know just how to market to you, trying to get you to purchase items you don’t need. Just because an item is on sale doesn’t mean it is a good purchase. If you ever feel pressured to purchase something, leave the store. It will be there later if you really need it.
