Money mistakes are common and in many cases, they are necessary in order for us to learn. However, why not learn about some of the common money mistakes so that you can avoid some of the pain that they may cause? Below are 10 common money mistakes.
Common money mistakes
1. Making late payments
Habitually making payments late affects your credit score as well as your bank account. Late payment penalties add up. It is also a cycle that is not easy to stop. Get yourself back on track by creating a good money management system.
2. Impulse buying
Unless you have a fun money fund for impulse buys get in the habit of thinking before buying. For years we planned all of our purchases. Our financial health is much better now so we can afford a few impulse buys. However, we are still careful and we are sure that we can pay for them without negatively affecting other areas of our lives.
3. Not having an emergency fund
You have no idea if you will lose your income or if there is an unexpected expense. If you are not prepared financially with some type of emergency savings you set yourself up for more stress and anxiety than you already have. Be prepared with an emergency fund to lessen any potential blows. Generally, three to six months is sufficient. More is always better.
4. Living above your means
Buying a home or a car that is more than you can afford may lead to unnecessary financial stress. Before taking out loans be sure that you are able to make the payments easily and that you are not biting off more than you can chew.
5. Using credit cards when you do not have the cash
There is nothing wrong with using credit cards as long as you do so responsibly. However, if you are paying for anything that you do not have the cash for, refrain from using your credit card.
6. Not saving for retirement
Time goes fast and the older you get, the faster it goes. Regardless of your age speak with a financial advisor to find a program that works for you.
7. You are not paying attention to your money
When you don’t pay attention to your money it can get out of control. Start a money management system and review your finances regularly. Periodically check your debt to income ratio, net worth, and spending habits.
8. No budget
A budget is a plan for how you spend your income. It is a useful tool for setting financial goals such as planning for future purchases, bumping up savings, or paying down debt. Not preparing a monthly budget can lead to unwise spending.
9. Going without insurance
Insurance is an expense that you hope you never need to use. However, if you do, it is well worth having it. There are so many insurance options and you are likely to add them as your lifestyle changes. Auto, health, homeowners or renters, life, disability, and pet insurance all come to mind.
10. Not shopping around
Take the time to shop around for better prices. Loyalty is important but if it breaks the bank then it might be time to move on. Check cell phone carriers, cable providers, and any subscriptions that you have. We recently changed our cell phone provider which reduced our monthly payment by $100 per month. That’s a big chunk of change.
Summary of money mistakes
Mistakes happen. We are not perfect and we can learn from them. Investments go sour, a deal does not come through, you paid your property tax late (I did that once and it cost me $700 because I paid one day late- never again!) or you made an error when balancing your checkbook.
You can not avoid all mistakes all the time. However, you can try to limit them in order to have good financial health.
Please reach out with any questions or comments.
Thanks for reading!
Stay balanced,
Jill