You don’t need to be a financial guru to manage your finances well.
And when it comes to finances, many people think they are “doing just fine”, or they are so overwhelmed they don’t even know where to start.
The good news is, you can obtain a healthy financial future by navigating around these common yet avoidable mistakes.
So before you find yourself stuck in a rut with no way out – if you are guilty of any of these financial mistakes – make sure you change course right away.
Refusing To Have A Budget
Do you know your monthly household income? Or how much you spend each month on utilities and groceries?
Have you set aside money each month for car or house repairs?
Debt.com conducted a budgeting survey and determined 20 percent of Americans do not have a financial budget.
Reasons for not doing a budget included everything from anxiety to conflicts among spouses.
Here’s the truth – if you want to achieve financial freedom, you’ve got to have a budget.
If not, you’re like a leaf in the wind, constantly reacting to unexpected expenses and not knowing an accurate picture of your finances.
And if you don’t know what you’re spending on what – how can you possibly save for the future?
There are hundreds of apps and websites to help you get started like Everydollar.com which allows you to set up custom categories and track what you spend each month.
Once you get in the habit of doing a budget, you’ll be amazed at how much waste you can cut out – and how much more money you can invest!
If you plan on retiring with a comfortable nest egg – you’ve got to invest your money in the markets.
Not sure where to start?
Meet with a financial advisor to help you develop a healthy portfolio – which includes calculating how much risk you can afford to take.
Or, start basic with contributing to your employer’s retirement plan and watch your money grow.
If your company has a matching percentage – take it! This is essentially free money they are giving you.
One of the biggest mistakes people make is not saving for retirement.
Sadly, many Americans plan to live solely off their social security funds, but with our government continuing to saddle future generations with an unattainable debt, it’s not a reliable plan.
And think about it…
Is social security really enough to maintain the quality of life you’re accustomed to living?
Or enough to leave a financial legacy for your children?
Don’t shy away from investing, let your money work for you.
Paying Only The Minimum
If you pay only the minimum monthly payment on your credit card or student loans – you are going to end up spending thousands of dollars in interest.
Tragically, all of that wasted money on interest fees could have easily been invested into an IRA – but instead your credit card company is the one making a profit.
You see credit card companies love to lure you in promising “cash back” or airline points for choosing their card – but if you read the fine print you’ll see most of them have an astronomic interest rate.
That’s how they get you.
Ideally, you should pay off your credit card balance each month.
If you are truly in a bind, consider opening up a zero percent interest credit card which allows you to transfer your high credit card balance for a small fee.
And then put all your extra money into paying it off. If you go this route, make sure you can truly pay it off in the allocated time – as it isn’t going to be zero percent interest forever (often they give you one year).
Most important, if you can’t control your spending – cut up your credit cards.
Co-Signing For A Loan
Maybe your sister has weak credit so she wants you to co-sign on a car loan for her.
She promises to pay her bill each month, but then she loses her job and can’t afford the $456 car payment.
Guess what – you get stuck with the consequences.
Not only will your credit score take a hit – but you are legally responsible to repay the loan.
In addition to the massive financial mess you’ve just involved yourself in, chances are your relationship with your sister is forever damaged.
All over a car.
If a loved one or friend asks you to sign on the dotted line – don’t do it!
Tomorrow Is A New Day
Even if you’ve made some of these mistakes in the past, tomorrow is a new day.
Learn from your mistake. Deal with the consequences.
And make a promise to your future self to avoid making the same mistake twice.
(h/t Mommy Underground)