The Money Mistakes You Might Not Know You’re Making
Everyone makes mistakes, but if yours are costing you extra, you need to reevaluate and make financial decisions based on your financial needs. Just because there is a new trend or someone gives you a money saving tip that worked for them, doesn’t mean it is the right thing to do for you. It is important to ask for help when it comes to money management if you are unsure of what to do. Here are some mistakes you might not know you’re making and some solutions to help you get back on track:
Money Mistake #1: Having Too Much in Your Account
It must be nice to look at your checking account and see a large sum of all your earnings, but is it really working for you? All of that money is just sitting dormant rather than generating interest.
Solution: Your money is better suited for a savings account if your checking account is overloaded with funds. A savings account can help you safely store your money while creating interest. You can also work with a financial planner to make sure this is the right decision for you.
Money Mistake #2: Cutting Back on Small Purchases
It’s always essential to stick to your budget, but skipping your morning latte isn’t as important as focusing on bigger expenses like your car payment. Though cutting out small purchases may be beneficial to help you save money in the long run, it does not change the fact that you have increasing debts and other outstanding payments that need to be taken care of first.
Solution: Focus on large, unpaid expenses first. Chances are those expenses are accruing interest and it is crucial to clear those payments before worrying about cutting out smaller expenses that may not make that much of a difference.
Money Mistake #3: Too Many Memberships
Most of the time you get persuaded in to joining clubs or memberships from certain businesses. Some of these can be quite costly with monthly and additional fees that add up over time.
Solution: Ditch the memberships and retailer-specific credit lines you truly don’t need. If you barely use the membership or rarely shop with the business, is there a point in continuing to pay for something you seldom use? If you think you’d like to keep a membership, you could always ask a family member or friend to add you as a user on their account, which can sometimes be more beneficial.
Money Mistake #4: Being Impatient
Sometimes it’s hard to wait even longer for that one item you’ve been coveting since it’s released, but it could be more expensive if you buy immediately. Being impatient can mean you’re always paying the more expensive price whether it’s a big ticket item or just a movie ticket.
Solution: It may worth it to play the waiting game. Try to wait until the price of the item gets reduced if you’re looking to buy something pricey. Items go on sale constantly and some businesses offer additional deals on top of sale prices. Try using a price-tracking website like keep.com, ShopTagr, or Amazon price tracker camelcamelcamel.com. There is nothing wrong with making big purchases, but make sure you’re getting the best deal. More importantly – be patient!
Money Mistake #5: Being Too Cheap
Sometimes being stingy can hurt your finances because you’re cutting back on expenses where you might need to increase spending. For example, if you buy a used car that needs frequent servicing to fix all the problems you bought it with, you are probably spending more money than you should to repair and maintain it.
Solution: Figure out which expenses demand investment. You may need to reassess your budget if you’re struggling with how to properly allocate your money. It’s also key to remember to give yourself enough money to put in your savings account. Don’t be cheap with your savings, as it is just as important.
Money Mistake FAQs
What’s the most common money mistake Americans make?
One of the most common mistakes American consumers make when it comes to finance is not saving for retirement early enough. The earlier one starts to build their retirement nest egg, the bigger it tends to be. For example, the difference between starting to save at 25 over starting at 35 can lead to a 200% difference in savings size by the age of 65, assuming a 7% average annual growth rate.
How big of a money mistake is it to not have an emergency fund?
Having too small of an emergency fund or none at all is a common financial mistake that gets consumers intro trouble with debt when surprises happen. While most financial experts would recommend keeping at least $1,000 as an emergency fund for sudden medical bills or car repairs, this is not nearly enough to cover major expenses which could surprise you. If you can afford it, having an emergency fund with at least a few thousand in savings can help give you a cushion against the unpredictable costs that can occur in life.
Get Experienced Help with Avoiding Money Mistakes
You need to be knowledgeable about your spending habits because making mistakes with your money could be risky for the future. It is your job to make sure you’re taking every action to save money and stay away from debt, but we all make mistakes and experience hard times. If you are struggling, don’t hesitate to contact our office and arrange a free consultation.