The 5 Biggest Money Mistakes You Can Easily Avoid
It can be hard for people to manage their money properly without doing a little research first. There are also BIG mistakes that people can make that will make it even harder for them to manage their money in the future.
The following 5 money mistakes will stop you from reaching your financial goals, but they can be avoided and here’s how:
1. Falling behind on your payments –
Once you fall behind on payments, it’s hard for you to catch up. You will have to pay a fee every time that you make a late payment. This will not only make it difficult for you to catch up on your payments, but it can also cause you to have to spend more money in the long run.
If you have been making payments late, then the first thing that you will need to do is catch up on your payments. You will also need to set up a budget. Additionally, using payment reminders can help you pay your bills on time. You can also set up automatic payments for most bills that will automatically deduct money from your account each month to pay the bill.
2. Using your credit card for every purchase –
Credit cards can come in handy. They can help you build your credit. They can also come in handy if you need to make an expensive purchase. However, you do not want to get into the habit of using your credit card to pay for everything. This can lead to debt problems.
People typically spend more money when they buy things with a credit card. It is also harder for people to keep track of their spending when they use their credit card for everything. If you find yourself having to use your credit card all of the time, then you will need to set up a budget and learn where your money is going each month so you can start to use cash instead.
You should only use your credit card when necessary. You should also try to pay off your credit card bill each month. This will not only help you avoid credit card debt problems, but it can also help you save money. You will not have to pay any interest if you pay your credit card bills on time and in full each month.
3. Spending every penny you make –
This is one of the most common money mistakes. It’s imperative to save money because you need something to fall back on if you were hit with an unexpected expense. You should use your dreams as a motivation to save money. For example, if you want to save up money for a home, then you should focus on that goal.
There are a number of things that you can do to decrease your spending. For example, you can decrease your spending by bringing your lunch to work instead of buying it every day. You can also make coffee at home instead of hitting up Starbucks each morning.
It’s also a good idea to use the 50/15/5 rule when it comes to your finances. Fifty percent of your income should go towards essential expenses such as housing, debt, food, transportation, healthcare, and other important household expenses. Fifteen percent of your income should go towards your retirement. Five percent of your income should go towards emergency expenses. Any money that you have left over can be used to build your regular savings account and also on some personal purchases.
4. Not getting insurance –
Life can throw unexpected curveballs. That’s why it’s essential for you to have insurance. Many people end up having to file for bankruptcy because they do not have any money to cover unexpected expenses. You never want to be “insurance poor” which is when you’re paying so much for optional insurance coverage that you have no money left over at the end of the month. Nevertheless, you do want to have certain types of insurance that help protect you and your family in case an emergency occurs.
You will need to make sure that you have health insurance. You will also need homeowners insurance or renters insurance. Additionally, you will need car insurance if you have a vehicle. Life insurance is also another great insurance to have because it will help your family if anything should happen to you.
5. Making big financial decisions when you’re not ready –
Society puts pressure on people to do things by a certain age. That is why many people make financial decisions when they are not ready. You should not buy a home, get a car, or start a family until you are financially ready to do so. We know that’s sometimes easier said than done, but these big financial decisions can have substantial and long-lasting impacts on your financial future. Even buying a car could ruin your credit for years to come if you miss a few payments.
It’s important to discuss financial matters with your significant other BEFORE you both say “I Do!” because one of the top 5 reasons for divorce in America has to do with money and financial problems. If money and budgeting are not discussed before marriage, big financial issues can arise once you’ve come back from the honeymoon and settled into your new lives. Try to learn about each other’s financial history such as debts, investments, assets and liabilities, budgeting techniques, etc. This will help you both understand the differences and similarities in how each of you manages your money. You should also talk about whether you want to merge finances or keep them separate.
These may be the 5 biggest money mistakes that you can make, but they’re not the only mistakes. The upside is that by taking a little time to learn about proper money management, you’ll be able to spot financial problems before they drain your bank account. Instead of thinking of it as avoiding these 5 money mistakes, learn something from each of these financial fumbles and what you can do differently to reach your ultimate financial goals.