10 Financial Mistakes That Will Cost You
A lack of financial resources is a significant cause of stress. But surprising to many, it isn’t what we make that is usually the cause of financial issues that cause us stress, it’s the way we manage our money. There are many factors involved. One of the most common is outspending your income. No one can spend more than they make indefinitely. Sooner or later, we find ourselves deep in debt.
Several other mistakes can contribute to financial challenges. Luckily, a few changes in habits can get your finances back on track.
Do you make these mistakes?
1. Neglect to pay yourself first. One cause of financial problems is the failure to save consistently. Many make the mistake of paying everyone else first with the intention of saving whatever is left over. There’s never anything left over with this strategy. Always pay yourself first.
2. No emergency fund. Without an emergency fund, your finances can take a serious hit. You’ll be forced to use credit cards, dip into other accounts, or delay paying some of your bills to pay for the surprise expense. All are serious setbacks to your finances. A minimum of 3 months of expenses will go a long way toward protecting you.
3. Failure to consider the long-term ramification of your choices. People that overspend are often focused on their short-term pleasure. It’s much like overeating and not thinking about the future implications because it’s satisfying at the moment. Make financial decisions with a long-term focus and you’ll find your wealth growing year by year.
4. Lack of the necessary knowledge. None of us was taught a personal finance class in school. Unless your parents were financially responsible and took the time to share their wisdom, you’re on your own. Buy a few books, research online, or seek the help of a financial coach who can educate you and help you put a plan in place.
5. Not knowing your numbers. Sit down and list your income, and all your expenses. Don’t forget to include those non-monthly recurring charges. Subtract your expenses from your income and divide what’s left between spending money, debt payoff, and your other goals. Try to save at least 10% of your net pay.
6. Not making it automatic. Automating both your bill-paying and saving gets rid of the legwork, mental tension and self-discipline required when you do things manually. It also reduces the temptation to spend funds earmarked for other purposes, so your savings grows faster.
7. You’re stuck. If you’re in a challenging financial situation, it’s easy to feel overwhelmed and stuck. Taking action becomes difficult. Getting yourself out of a financial hole can take time, but it’s doable. Get help from an expert who can listen and guide you if you need to. It can help relieve stress.
8. Overspend on your housing and transportation. It’s easy to make the mistake of purchasing as much home as your finances will allow. The same goes for that new car. However, it’s important to keep these expenses in line with our income, as overspending on the big things is often the reason why we don’t have money to spend on fun or to save.
9. Excessive use of credit. Using debt to purchase a home or pay for college can be a reasonable use of debt. Most other uses are hazardous to your finances. You’ll ultimately end up paying much more for an item or service due to the interest incurred if you don’t pay your balance in full every month. Living with debt is like running against the wind. It makes everything harder.
10. You spend more than you make. This is the core reason for a lack of wealth. You can never run out of money if you spend less than you make. Our society encourages unnecessary expenditures. Have the discipline to spend less than you earn.
Living paycheck to paycheck is common – 75% of Americans do. The only way to break that cycle is to save regularly and spend less than you earn. Begin today to save at least 1% of your paycheck. Resolve not to use your credit cards. Keep increasing the amount you save each month and look to the future.
You can live a life of financial abundance.