Avoid Making These Financial Mistakes
Managing and controlling your personal finances is no easy task because it involves careful planning, experience and continual learning to reach the point where you finally feel at ease about the direction your financial future is taking. As such, it’s inevitable that you’ll make at least one or two money-related mistakes along the way.
Below are some common financial mistakes that can be avoided:
It has been said that great fortunes are often lost one dollar at a time. It might not seem like a big deal when you splurge on eating out or buying that coffee every morning, but in reality, every penny you spend will add up over time.
Spending $30 on that restaurant meal once a week will cost almost $1,600 per year, an amount that could make a sizeable dent in an auto loan or mortgage balance over time. Although you may feel that you deserve this weekly splurge, you should only give in to it if you know that it won’t affect your long-term financial goals.
Not Having an Emergency Fund
More than half of working Americans have admitted that they would have to pay for a $400 emergency by using a credit card because they have no savings set aside. This behavior will not only cause debt to accumulate quicker than you realize; over time, that $400 emergency could end up costing you double that amount because of accumulated interest and finance charges.
It’s recommended to have an emergency fund that can cover a minimum of three months of regular expenses – this will become a literal financial lifesaver over time.
Making Minimum Payments on Credit Cards
Although many individuals think credit cards are helpful and provide them with reward points, the hard truth is that they become dangerous where financial responsibilities are concerned – especially when you only make the minimum required payments on outstanding amounts each month.
If you have to use a credit card for any reason, ensure that either the full amount is repaid as quickly as possible or that you repay a fair bit more than the minimum required payment. This will reduce the amount of interest that is being charged over time.
Failing to Save for Retirement
Several Americans delay starting retirement funds because they think ‘there’s still lots of time to do this.’ However, this time of your life will arrive before you even realize it.
Starting a retirement fund in your 20s or 30s will not only mean that you’ll need to set aside smaller amounts each month; the power of compounding interest over a few decades will help ensure that your money grows by a sizeable amount – giving you enough to retire on when the time comes.
It can seem overwhelming to try and compile a budget, establish an emergency fund and save for retirement at the same time. However, taking one step at a time will help you achieve these goals and provide you with the peace of mind you deserve where your financial future is concerned.