From the time you receive your first little piggy bank, your elders try to encourage the discipline of saving money. How, exactly, do you do it? One way to protect your financial health is to know five of the most common financial mistakes to avoid. Stay away from these common financial mistakes, and you might have something left over to save.
Misusing Credit Cards
Indulging in frivolous spending using credit cards is a major mistake. High interest rates will compound every month you can’t pay the full balance. Sit down, figure out which credit card has the highest interest rate, and pay off that one first. Then, take the money you were paying each month on that card and put it toward paying the next highest rate card until you’ve paid them all off. Finally, don’t run them up again.
Spending Too Much on Housing
Finding affordable housing has become a major challenge, if not a crisis, for many people trying to find a decent place to live. Learn to accept living with roommates, or step down to a studio apartment if you live alone.
Buying more house than you can afford has been the first step to financial downfall or even different types of bankruptcy for many people who wish they had known better.
Living Paycheck to Paycheck
Spending every penny you earn guarantees you’ll never save any money. It leaves you without a critical resource: an emergency fund. Even if you can only afford to stow away a few dollars out of each paycheck, make sure to “pay yourself first” before spending money on anything else.
Missing Out on Employer Contributions
Failing to take advantage of employer contributions to a retirement plan is like throwing free money out the window. If your job comes with a retirement fund benefit, sign up to make at least the minimum contribution necessary to get the matching employer contribution. Remember, contributions to retirement funds aren’t a substitute for a separate emergency fund.
Failing To Make a Budget
You can’t effectively save money if you don’t know how much you’re spending and what you’re spending it on. When you sit down and make a monthly budget, you may be surprised at how much money is slipping through the cracks, spent on expensive coffee drinks, unused streaming subscriptions, takeout meals, or untouched gym memberships. Tighten up your spending by making a budget and sticking to it.
When you’re serious about saving, it becomes a positive habit. There are even groups of like-minded people who have committed to saving so much that they can retire early. Avoiding these five common financial mistakes is a good start toward a more stable and prosperous future.
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