As you go through life, it’s easy to make mistakes from time to time, especially when it comes to your finances. When you’re first starting out, you may not have a thorough grasp on your income versus your expenses, or may neglect some important aspects of financial planning. However, the earlier on you can learn from your mistakes, the better off you’ll be down the road financially, especially if you avoid these money mistakes before they happen.
Many people wait to start saving because of life circumstances. Maybe you have a low-paying job and feel you need every spare penny to go towards bills, or you want to pay down all your debt before you put money away for emergency savings or retirement. Perhaps you have children and need as much of your income as possible to pay for daycare, diapers, and other expenses. However, while your reasons may be well-intended, you could be hurting yourself by waiting too long to get started. The earlier you put money away for retirement or emergency savings, the sooner you can take advantage of compound interest, which can result in more money for you down the road.
You’ve decided to put money away into savings, but only whatever you have left at the end of the month. You may find that once the end of the month rolls around, however, you have nothing to put away. Avoid this common mistake by paying yourself first– that way, you’ll always have something in savings. If you find that you have a hard time putting money into savings, automate it. Having a portion of your paycheck automatically swept into savings is an easy way to ensure you’re consistent with your savings and you’ll quickly forget that part of your paycheck is being put into another account.
If you’ve made the choice to invest your money for retirement, you’re already on track towards financial success. However, be careful you don’t get too emotionally involved in your investments. One of the most common mistakes people make when it comes to investing is to watch their investments too closely or let emotion take over when there’s a dip in the stock market. Though it can be difficult, you must remember to look at the big picture rather than the day-to-day changes in the market. Chances are over time your investment will grow depending on how aggressive your portfolio is. Try not to panic and make changes to your investments without speaking with an advisor first.
If you own a home or a car, chances are you have insurance. However, you may not have looked at your policy since you first purchased it, which means you could be missing out on additional savings. If your homeowner’s and car insurance are on separate policies, you may be able to bundle the two together and save money on your monthly bill. If you have a family or other loved ones who depend on your income, you may also want to consider purchasing additional life insurance to ensure they’re protected in the event of your death. Talk to your local insurance agency to ensure you’re getting the best insurance for you and your family.
Relying on Credit
Credit cards can come in handy when there’s an emergency and you don’t have the cash on hand to cover expenses. However, relying too heavily on credit can have major repercussions on your financial health. Instead, avoid the temptation of instant gratification and rely on saving money for major purchases and other expenses.
Use these tips to help you make smart financial decisions. If you remember to check in on your finances annually, and keep the future in mind, you should be on track toward financial success.