Maintaining good finances isn’t an exact science. In fact, many people make financial mistakes at some point in their lives that could have been avoided with a little financial education. While it’s okay to make small mistakes from time to time— after all, it’s how you learn for the future— don’t let yourself fall victim to making these larger financial choices you’ll likely regret later on.
Neglecting a Budget
Do you have a budget? If you don’t, what are you waiting for? Neglecting to create, and follow, a budget can hurt you financially in the long run. Having a budget is one of the most basic financial decisions you’ll make and it lays the foundation for making sound choices in the future. You can find simple budgeting software online, often for free, to help you get started.
Having an emergency fund can help you out when the unexpected comes up, yet most Americans don’t have enough put away to cover even the most basic $500 emergency. Don’t let yourself wind up in a situation where you have to turn to credit cards to pay for an emergency. Instead, put away a portion of your paycheck into a savings account each month so that if something comes up you’re covered.
Relying on Credit
Credit cards can be useful to have in a situation where you need quick access to money and can’t get to your savings account. They’re also a great way to earn points for airline miles and other travel perks if you’re a road warrior. However, credit cards shouldn’t be overused or you may find yourself in over your head in debt you can’t manage. Instead of depending on credit cards, be smart with your money and if you do need to use a card, be sure you have the funds available in your account to pay the balance in full at the end of the month.
Ignoring Insurance Needs
If something were to happen to you today, would your family be provided for? Would they be able to cover funeral expenses? Most people wait to obtain these policies because they’re healthy, but in reality, it’s best to obtain policies when you’re young and healthy and premiums are low. You’ll hopefully never have to use it, but you’ll have peace of mind knowing that if the unexpected happens, you’re covered. Your local insurance agents should be able to work with you to determine which type of coverage makes the most sense for your needs.
If you’re like most Americans, you aren’t thinking about retirement. In fact, most Americans don’t have any money in a retirement account which could affect their ability to retire later on. It’s never too late to start putting money away so you can retire. If you plan to live on Social Security alone you may be in for disappointment, as it usually can only cover basic expenses. If your employer offers a 401k with matching funds, sign up ASAP to take advantage of free money.
Don’t feel bad if you make small mistakes now and then. Life happens and even the most frugal person can find themselves in over their head. However, if you can avoid making these major financial mistakes you should find yourself happier and in less debt.