Common Money Management Mistakes
Common Money Management Mistakes
When it comes to your finances, making a mistake can often prove to have devastating long term effects.
Have you ever had a moment in your life where you think back at a past event and wished if only you had done things differently? Making mistakes is part of being human and very often how we learn and improve ourselves and our lives. And as humans, not only can we learn from our own misfortunes, but we also have the ability to share and learn from those of others as well. Here are a few common money mistakes to avoid:
Living above your means
It is so easy to fall into the trap of spending more than you have coming in each month. It is also incredibly enjoyable to not ever have to restrict your spending. But if you are relying on credit or robbing Peter to pay Paul, that enjoyment is sure to come to an abrupt and bitter end. Eventually things will catch up to you.
Living within your means involves having a budget and spending only what you can afford. You may not have the big house, luxury vehicle, designer clothes or lavish vacations that you dream of, but you will be able to rest easy at night knowing all your bills are paid and you're not carrying loads of debt. If you focus on budgeting, saving and prioritizing each month, you will position yourself to work toward and achieve your ideal lifestyle.
Not paying bills on time
Missing payments or ignoring bills will not make them go away. Your debtors will not give up on you. Missed payments not only cost you more money in added fees, but will also result in poor credit. If you miss payments on secured debts such as your mortgage or car payment, you put yourself at risk of losing your home or having your car repossessed.
By paying your bills on time each month, you will avoid paying out additional fees and keep your credit in good standing. A good credit score means you will be viewed as a responsible borrower and more likely to receive lower interest rates when applying for future loans or credit cards.
Read More: 5 Money Management Basic Habits For Financial Success
Not having an emergency fund
When experiencing an unexpected event such as a medical issue or job loss, many people are completely unprepared. No one wants to live their life planning for the worst case scenarios, nor would it be advisable to do so; however, it is advisable to have a “just in case” emergency savings account.
It is recommended to have three to six months' worth of household expenses saved in an emergency fund. Whether you find yourself able to save that much or if you only manage to save a few hundred dollars in the account, you will find comfort knowing you have some extra funds should an unexpected event arise.
Not saving for retirement
It can be challenging to see the benefits of saving money that you will not be able to use for many years. Spending in the present can seem much more rewarding than planning for the future, especially when that future may be so far away. Often people put off saving for retirement, thinking that they have plenty of time, but this proves to be a regret many people have as they get older.
As soon as you start earning a paycheck, you should be contributing to a retirement plan. Whenever your income increases, so should your retirement contribution. Having a retirement plan that continues to grow will prove to be very rewarding, especially when you are ready to retire.
Lauren Lovett has been with Navicore Solutions for seven years serving as a Certified Credit Counselor and Grant Writer. While in these roles, she has witnessed the positive impact that the organization's counseling services has on improving the money management skills and economic security of individuals and families in need.