We all have faults when it comes to managing finances, but many of us aren’t aware of them. Hey, nobody is perfect. Identifying the underlying money management mistakes you might be making can help you ditch less-effective financial habits and take control of your future.
Start by considering the following six common money mistakes to know what NOT to do with your money:
1. Spend mindlessly
Do you spend money on things without even thinking twice about it? In today’s world, it is so easy to swipe a debit card and experience the instant gratification associated with buying goods or services. Let’s take a step back and make decisions about purchases that align with your priorities, life values and financial goals. In other words, does buying the expensive watch at the jewelry store align with your goals of saving up for a new car? If that goal doesn’t align, you should re-consider that purchase.
2. Let your financial paperwork, bills and statements pile up
Make time to get organized. Stay on top of your finances so you are aware of important information about your accounts and know when payments are due. Actively managing your finances will help you avoid unnecessary late fees and additional interest charges. If you are using a budgeting app like Mint to help manage your financial life, you already know they track every detail when it comes to your accounts, including fee charges, interest rates, and high spending areas. If you have difficulty remembering the due dates of your bills, or need the extra nudge to put money into savings, Mint let’s you set up reminders.
3. Shortchange your savings
As always, it’s important to pay yourself first. Do save for short-term goals. Just make sure you save for long-term goals and emergencies as well. Having a savings plan in place will ensure you are covered in the event of a financial emergency, as well as allowing you to purchase that next big ticket item. Perhaps now you can buy that expensive watch you’ve been eyeing?
4. Waste money on interest by making minimum payments
Making only the minimum payment on a balance of $1,000 at an interest rate of 18.9% will take 5 years to pay off, for a total $1,563! That’s $563 in extra fees. Try to find the extra money by reducing your grocery bill, changing to a cheaper cell phone provider or switching to a different cable carrier — apply the savings directly to your principal balance. Reducing your outstanding debt faster will put more money in your pocket in the future.
5. Procrastinate your financial responsibilities
When life gets busy it’s easy to put off the tasks we want to do least. Take a lunch hour and tackle a financial goal, whether it’s reviewing your budget or credit card statement. Bonus points for opening a savings. Seeing one of your financial goals put into motion may give you the boost of confidence you need to move on to your next goal.
6. Put off your future
This one may be geared more towards our students who are getting ready to graduate and are thinking about retirement savings with their first job. Actively plan and manage your retirement. Even if it seems far away, begin to determine how you’ll pay yourself in your retirement years.
Acknowledging your past money mistakes now will enable you to recognize them — and replace them with better decisions — in the future. Over time you will see that these new financial habits become second nature.