Everybody makes mistakes – it’s how we learn. Yet most of us would prefer to avoid making financial mistakes whenever possible, especially when faced with uncertainty.
There are ways to become more financially responsible without falling into common pitfalls. By looking at the most common financial mistakes made by others, we can better understand what to avoid. With that in mind, here are some of the most common financial mistakes.
No Emergency Fund
When tackling debt and a high cost of living, saving up for an emergency fund can feel next to impossible. But failure to set aside any emergency funds will ultimately cost people more, as the inevitable will only incur higher debt.
The last two years have taught us how important it is to have some financial safety net. While a more considerable sum is ideal, even having some emergency gas money set aside can make all the difference.
Spending a dollar here and there doesn’t feel like it’ll amount to much, yet each dollar spent adds up over time. People trying to save money should avoid spending money on items they don’t need. In other words, consider only buying things that are necessary or that you know will last a long time.
Sometimes it can be hard to cut back on spending. Several budget apps will track your spending and help you create a plan to cut back. Those struggling should consider utilizing this additional help.
Certain things in life require monthly bills and payments—utilities, car payments, mortgages, etc. We’ve gotten used to paying these bills, so perhaps that’s why other monthly incurring expenses are so quick to follow suit.
Consider all the other monthly expenses in your budget; cable, streaming subscription services, gym memberships, and so on. While one should never have to cut out everything they enjoy in life, it would be advantageous to be realistic about these expenses. Are you really using all those streaming services? What about the gym membership? Are you getting your money’s worth out of it?
Ignoring the Mounting Debt
The best way to handle debt, such as credit card debt, is by staying on top of it. This means paying off your credit card debt as quickly as possible. Doing so saves money, as it cuts down on the money spent on interest each month. The larger the balance, the bigger the interest. Even paying slightly more than the minimum required payment each month will do a better job at making a dent in your debt.