A lot of people believe they need to be financial experts to master their money. This holds a lot of people back from achieving their financial goals. Thankfully, following a few basic steps can help you optimize your finances.
However, you must first break some bad financial habits to put yourself on the best path possible. Here are ten money mistakes you can’t afford to make if you want to reach your desired end goal.
Fortunately, you don’t need to be an MBA to overcome any of them.
Table of Contents
Not Tracking Your Spending
Do you know what your money is doing every month? Better yet, do you know where your money is going after you receive your paycheck?
If you don’t, it’s time to track your spending. You don’t even need to live on a budget to do this. However, you do need to know how you spend your money.
This helps you identify if you’re overspending on something foolish so you can cut it back and apply the money to other needs.
Not Having Clear Savings Goals
We all have goals in life, and many of those goals require money. It takes time to amass that money to make the goal a reality.
For example, you don’t simply decide to buy a house one day. You need to save to allow that to become a reality. Not doing so will make the goal much more difficult to achieve.
Take time to write down your goals and identify how you will work towards them.
Treating Credit Cards Like Monopoly Money
Reports show more and more people have increasing credit card debt. Credit cards are a fantastic tool to use, but they’re not free money.
This is a situation I faced when I amassed $25,000 in credit card debt. If you’re in debt, it’s time to make a plan to attack, as it doesn’t have to be your normal.
Avoiding an Emergency Fund
According to Bankrate, nearly 60 percent of people are uncomfortable with their level of savings. If you don’t know how to cover an emergency of $500, it’s time to start on your emergency fund.
Many online banks, such as CIT Bank, have minimal balance requirements and pay a super competitive rate. Start with a goal to save $250, then $500, then $1,000. Use that as a basis to reach one month of living expenses, then to at least three.
Abusing Cash Advances
We all face times where we’re short on cash. Paycheck advance apps represent a solution to this problem.
Unfortunately, it’s easy to turn their use into a never-ending cycle. Reports show that 33 percent of Americans have used them in the past year.
If that’s you, find a way to grow your savings so you can avoid them.
Not Comparing Interest Rates
Interest rates impact you in two ways – on savings and loan products. Avoiding comparison shopping can cost you hundreds or thousands of dollars.
It literally pays to make your money work for you as much as possible and pay as little as possible when you need to borrow.
Waiting to Invest
It’s easy to believe that you need lots of money to invest. That is a myth that traps far too many people. Yes, more money is better, but it’s time that is most important when it comes to investing.
Thankfully, plenty of investing apps for beginners let you start with next to nothing. Many also offer plenty of tools to help you learn the ropes.
Not Asking For a Raise
An uneasy reality for most of us is that our employer is only going to operate in their own best interest. One key way that is evident is through their employee’s pay.
Recent surveys reveal that under 40 percent of workers ask for a raise annually. If you’re a part of the 60 percent that don’t, it’s time to make that a practice.
Arm yourself with the “why” behind your ask and make your case.
Making Late Payments
Life is busy, and it’s easy to forget to pay a bill. Unfortunately, that leads to fees, interest, and a reduced credit score.
You can automate payments or set calendar reminders to avoid this problem. Your bank account will thank you for doing it.
Insurance is one of those things we all like to forget. Doing this with life insurance could potentially leave your family without means in the event of an untimely passing.
Forgoing comparing auto insurance rates could open you to spending far more than you need to for coverage. Insurance, on most levels, is largely personal, so it’s best to adjust it to your specific needs.
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I’m John Schmoll, a former stockbroker, MBA-grad, published finance writer, and founder of Frugal Rules.
As a veteran of the financial services industry, I’ve worked as a mutual fund administrator, banker, and stockbroker and was Series 7 and 63-licensed, but I left all that behind in 2012 to help people learn how to manage their money.
My goal is to help you gain the knowledge you need to become financially independent with personally-tested financial tools and money-saving solutions.