5 Money Mistakes to Avoid
Feeling financially successful doesn’t come easy to everyone. According to Experian’s latest Personal Finance Survey, only 17% of respondents said they felt “very secure” about their finances. What’s even more troubling is 26% felt less financially secure compared to the previous year.
With so many factors playing into your financial health, feeling some unease about money is understandable. To help you stay on track with healthy financial planning habits, try to steer clear of these common money mistakes.
1. Spending money without a budget
Although there’s nothing wrong with enjoying your hard-earned money, not having a budget leads to a lack of financial focus.
A budget helps you prioritize your cash flow toward your most important expenses, like your rent or mortgage, household utilities and other bills. It also helps you actively work toward saving for your personal goals, whether that’s building up your rainy day fund or saving for a home down payment.
After prioritizing your needs and short-term goals, checking your budget let’s you better understand how much discretionary income you have for “wants”.
Apps like Mint and YNAB (You Need a Budget) are popular options for DIY budget tracking. If you want to take your financial planning to the next level, reach out to a budget coach at The Gym to get started.
2. Living your best life on a credit card
Credit cards can be a powerful tool, when used responsibly. But if you’re constantly living beyond your means and overspending on your card, you’re in for a debt spiral that can get out of control.
Carrying over your credit card balance into the next month is a red flag that’s screaming for your attention. Very quickly, your credit card debt can balloon as interest charges are tacked onto your statement.
If you’re not confident in your ability to control your credit card spending, consider using a prepaid card or cash instead. Being a smart credit card user means knowing how much you can afford (equally important — sticking to it) and tracking your day-to-day spending so you don’t cross your personal threshold.
An easy way to stay on top of your card spending is to set up alert notifications through your credit card account. For example, if your maximum budget for “fun” spending is $300 per month, you can create an alert to email or text you when your balance reaches $250 and $300.
This keeps you aware of how much you’ve spent, before going in the red.
3. Getting hit with avoidable fees
If you’re already humming when it comes to your budget and credit card habits, you might already steer clear of overdraft fees and interest fees. There are a few other avoidable fees, however, that are seemingly harmless but add up.
Often, these fees could’ve been avoided simply by planning ahead. For example, getting charged a $6 out-of-network ATM fee while out with friends adds up, if you regularly forget to pull out cash each weekend. Other fees creep up in daily life, too, like running your parking meter dry or failing to read street parking signs (hello, $250 citation!).
Even bailing on your fitness class because you forgot about dinner plans with your in-laws, and getting charged a $25 late cancellation fee can derail your finances. To avoid these fees, try tracking your time more closely.
Add all of your commitments, including commute times and other tasks to do beforehand, into your calendar so you’re not wasting money, needlessly.
4. Failing to check your credit report
You might know what your credit score is, but if you’re not regularly checking your full report you’re only getting a glimpse into your credit profile. And since creditors look at your entire credit history to make decisions that impact your financial goals, you should be on the same page.
Aside from having the same level of transparency creditors have in their approval process, checking in with your credit report helps with your financial planning. You can use it to view your debt from a high level since it includes all of your consumer debt, like your mortgage, credit cards and loan accounts.
It also helps you identify what might be hurting your credit score, by showing you delinquencies and defaults associated with your credit profile. This information informs your next steps to rebuild or maintain your credit. Another way it’s helpful is by surfacing fraudulent accounts and lines of credit that you might not be aware of.
Every 12 months, you’re entitled to a free credit report from all three credit bureaus (Equifax, Experian and TransUnion) which can be requested from www.AnnualCreditReport.com.
5. Delaying your retirement savings
Since retirement is such a long-term goal, it’s easy to procrastinate on saving for your future self. There are always reasons to avoid investing in your 401(k) or IRA, if you try hard enough. Some excuses might include: not earning enough money, believing you have plenty of time to do it later or funneling your funds toward today’s expenses first.
But there’s a reason why the saying “time is money” fits so well with retirement savings. The earlier you start saving in a tax-advantaged retirement account, the more time your money has to get reinvested and grow.
And if you have access to an employer-sponsored 401(k) plan that offers matched contributions, even better. You can accelerate your retirement savings by contributing the maximum percentage of your paycheck that’s matched by your employer.
Every strong financial planning strategy has a retirement component in the mix. Speaking with a budget coach can help you plan for your long-term goals, like retirement, while also helping you keep your financial plan steady in the process.