Even the wealthiest can lose their fortunes if they continually make money mistakes. Spending frivolously, not paying off credit cards every month and living paycheck to paycheck are problems to be addressed and rectified. Are you perhaps spending too much on necessary services and bills, such as your streaming service or your car and home insurance? Looking around for better options and the cheapest car insurance can take some time, but in the long run, you’ll be happy to see savings coming in the door!
Paying Off High Interest Debts First
Debts accumulate as you get further into adulthood and it can be difficult to distinguish what should be paid first and what last. You might have a car loan, mortgage, student loan, and other debts that need attention. The first thing to do is to make a list of all of your debts (every credit card, basically what you pay off every month) and then next to it, write down how much you owe and how much interest you are being charged. Chances are good that your mortgage rate is lower than your credit card rates, so after everything is paid, put extra money toward the higher interest debts to work them off faster.
Failing to Have a Contingency Fund
You can be as on top of your financial game as possible, and then one day the roof starts leaking and you’re right back where you started – robbing Peter to pay Paul, as they say, and strapped for money that you need to pay off your usual monthly debts. It might seem like an overwhelming task to save up enough money for a ‘big disaster’ type emergency, but if you start small you will get there. Start by creating a separate savings account and getting a small percentage of your paycheck to be funneled into it. Don’t allow yourself to get a debit or ATM card for this account as that will make it easy to withdraw money without a good reason. Soon, you’ll see it growing and feel confident that you can weather a rainy day.
Not Partaking in Employer Contributions
If you work for a company that offers employer matched contributions, take full advantage. If you don’t, you’re leaving good money on the table that could be in your growing retirement fund. Regardless of your age, thinking about and starting to save for retirement is smart. Any percentage will work but consider making the highest contribution possible to get the most out of this employee benefit.
Succumbing to “Lifestyle Creep”
People are very good at adapting. If your income was suddenly split in half, yes, it would be a tremendous hardship but you would do what you had to do to survive. But, if your income were to double, chances are good you would start living more extravagantly. The problem here is that when you do receive a raise or a bonus or money back from the government or an inheritance, if you use it to ‘buy more stuff’ you’re essentially giving in to what’s known as “lifestyle creep.” At the end of the day, your savings accounts and investments have nothing more to show for the gain. Instead of feeding into the call of capitalism, take a good portion of that newfound money and sock it away in an investment or savings account or even your contingency fund.
You’re Buying Impulsively
Never before has it been so easy to make purchases – of pretty much anything you want. After a couple clicks of the mouse you can have whatever your heart desires delivered straight to your doorstep. Our ancestors would be shocked, amazed and probably a little bit horrified. While it’s perfectly okay to treat yourself sometimes, if you find yourself spending frivolously or thinking “I’ll just return what I don’t need” and then never returning it, you’re on a downward financial spiral. Force yourself to take 3 days or more to consider if you really want to make that purchase. Categorize it into a want or a need. Think about what else that money could be spent on or saved up for in the future.
Purchasing a Brand New Car
A mistake that many people make when looking for a car to buy is that being able to afford the car payments means that they can afford the actual car. This isn’t the case. Pretty much all cars lose their value when you drive them off the lot, and you will never recoup that money. So, you’ll be paying good money on a depreciating asset. Instead, look for used cars that are known to keep their value and have great reputations for holding up.
If you’re ready to turn your financial life around, now is the time to scrutinize the types of mistakes you might be making.