No matter what stage of life someone is in, it doesn’t hurt to listen to some helpful advice on how to manage finances. Whether you’re just getting with your first real job after college, are saving for your child’s education or nearing retirement, there are some simple mistakes everyone can avoid to make the most out of their money and be financially smart.
Pay Yourself First
You may have heard the saying about allocating a portion of your paycheck to your own spending, but you may not know that same principle can be applied towards saving as well. Everyone can benefit from putting a portion of their paycheck into savings before anything else, even paying bills. If you wait to put whatever you have left at the end of the month towards your savings, you may find that it won’t grow as quickly, which can make saving for an emergency or other major expense difficult.
Neglecting to Save for Retirement
In addition to putting money away for everyday expenses such as emergency savings, you should also think long term. One of the most common money mistakes to avoid is not putting enough away for retirement, and it’s delaying their ability to retire. After working hard your entire life, you deserve to have an enjoyable retirement, so don’t delay saving. You’re never too young to start putting money away, and the sooner you start, the longer you’ll be able to take advantage of compound interest.
Getting into Debt
There are often what people like to call good and bad debt. Good debt, such as your home, can give you equity which may pay off in the long run, and then there’s bad debt, such as credit cards, that often don’t give you much to show for and come with hefty interest rates. Before you make a purchase, ask yourself if you’d be willing to pay for it with interest, or if you have the money in your checking account to cover the purchase at the end of the month. If the answer is no, it may not be worth getting into debt over.
Buying Too Much House
If you have a large family, purchasing a large home may make sense for you. However, if you live alone or aren’t planning on expanding your family, it may not be worth getting into debt over a sprawling home. Before you purchase a home, consider extra expenses, such as taxes, insurance, and maintenance to see what you can afford. If you find that after considering these expenses, you’ll be struggling to meet your other financial obligations, it may not be a wise decision to get the biggest, nicest house on the block.
Auto payments can be a great way to streamline your bill pay system and ensure you don’t forget to pay a bill each month, especially if you have a tendency to forget. Some auto payments, such as your mortgage, student loans, and retirement savings. Others, such as gym memberships, cable, or subscriptions may not make good financial sense, especially if you don’t use them regularly. Assess what comes out of your account each month and cancel anything you don’t use.
Remember, it’s okay to make mistakes. It doesn’t mean you can’t be financially successful if you don’t have a perfect plan. However, by avoiding some of these common money mistakes, you’ll be off to a good start in managing your finances