Life is hectic. After spending time with your family, your friends and your job, there’s not much time left to spend managing your money. But left unmanaged, these 10 common money mistakes can leave you with a lot less money to spend on the fun stuff.
Are you guilty of any of these common money mistakes?
1. No budget, no financial plan
Let’s face it – if you don’t know where the money goes, you could be spending more than you earn. Everyone, regardless of income, needs a budget. And if you have a major expense in your future (you want to buy a house or a car, for example), then it’s even more important to put together a written plan and then check yourself against it. Every. Single. Month.
2. Paying the minimums on your credit cards
Are you paying just the minimum on your credit cards? If so, you could be paying for a long, long time. Use this Credit Card Payoff Calculator to learn how much you can save just by paying a little more each month.
3. No emergency savings fund
Emergencies happen when you least expect them, and they’re almost guaranteed to be expensive. When you have rainy day money set aside, even if it’s just a small amount, you not only avoid expensive credit card debt, but you also relieve some of the stress of handling the emergency itself.
4. Not saving for retirement
Retirement will be here before you know it. Will you be ready? The key to matching retirement savings with retirement dreams is to start early. Even a little bit each month will grow over time. And if you’re failing to take full advantage of a company match or catch-up contributions, then you’re really missing out.
5. Ignoring a low credit score
If your credit score is less than 600, it’s time to do something because bad credit costs you every day, all year. You’ll pay more for your mortgage, you’ll pay higher credit card interest and you could even be paying more for insurance. Fixing a bad credit score takes time and discipline, but you can do it.
6. Paying too much for financial services
When you join a credit union like Alaska USA, you’ll pay lower loan rates, fewer fees and get higher returns on deposits than you’d typically find at a traditional bank. The money you save goes directly toward your bottom line. Plus, when you make smart moves like bundling your insurance, you’ll save even more.
7. Splurging with your tax refund
Most Americans receive a refund on their tax return. While it’s tempting to run out and spend it, avoid this common mistake and instead, invest the money. Pad your emergency savings, pay off your credit cards, make an extra loan or mortgage payment, or invest it for retirement.
8. Co-signing a loan
There are some legitimate reasons to consider co-signing a loan—to help your child buy that first car, for example, but in general, co-signing can be a very risky thing to do. If the other person does not make their payments, you will be responsible for repaying the full amount. Even if they just make late payments, it will negatively impact your credit and take years for you to recover. Plus, it’s a good way to wreck a relationship.
9. Being underinsured
Or worse yet, having no homeowners or renters insurance at all. Even if you don’t think your property is worth much, insurance provides liability coverage, protecting you from a lawsuit if someone is injured on your property or in your home.
10. Living beyond your means
This is a tough one. Aren’t we all guilty of buying at least one thing we really couldn’t afford? But when doing so becomes a habit – when you find yourself eating out too often or taking vacations you can’t afford – your finances will spin quickly out of control. The best solution? See #1 above.