Considering how often you use it, you think you would be better at saving money. But like remembering the garlic toast before it burns under the broiler or creating a flawless cat eye liner that matches the other eye, sometimes the things you do most often don’t come out as well as you hope. Managing your money is just one of those chores that doesn’t come naturally to you. It’s far too easy to make a few mistakes that stop you from saving properly. Luckily, it’s just as easy to fix these mistakes. Scroll down to see the most common mistakes people make with their finances, and make sure you aren’t making them, too!
Going Without A Specific Goal
A goal (or several — there’s no limit to the number you set for yourself) is a great way of focusing your financial attention, but it’s only helpful when you make it correctly. Setting a goal isn’t simply setting a basic intention and hoping for the best. Successful goals — ones that you can actually attain — are made mindfully with precision.
Everyone at one point in their life has said they need to spend less and save more. While well-intentioned, this promise doesn’t have the makings of a successful goal because it lacks detail. Effective goals answer the basic who-what-when-where-whys. In this case, you need to identify how much less you should be spending and how much more you should be saving. More still, you need to give a purpose to the way you spend and save your money. You must be able to know why you’re changing the way you use money.
For some single women, this may be paying down debt or saving for a new home. For others, it could be a week-long trip in the Galapagos or an iPhone X — no mean feat, as it’s heralded as Apple’s most expensive phone. For you, it could be entirely different. You need to think about what excites or concerns you the most and take it from there.
But you’re not done quite yet. Once you’ve identified your target, you need to assign a timeline to your goal. Figure out when you want to pay them off by. Then calculate what sort of payments you’d need to be making to hit that target.
Spending Without A Budget
Once you have a detailed goal, you need a budget to make sure your expectations are realistic. It helps you identify cash flow problems that stand in the way of achieving your goals. It does this by outlining the way you spend your money, so you can understand where your finances sit.
Unfortunately, the act of creating a budget isn’t very fun. While there are free money management apps that can help you, a budget is at its most effective when you’ve had a hands-on approach on its creation. When you sit down in front of an Excel spread sheet or an old-fashioned piece paper, you’re forced to confront your spending habits. It’s not always easy when faced with mindless overspending, but this realization can be what forces you to change your ways.
Carve out a time when you can devote your full attention to your finances. You’ll need enough time to review old statements and other financial documents so that you can track the way you’ve spent your money over several months. This will give you a better understanding of your long-term habits. Then itemize your spending by categories to see where you’re going wrong.
Living Without A Safety Net
A budget can help you plan for retail splurges and vacations. But that’s just the icing on the cake, so to speak. Before you can budget for the fun stuff, you need to make sure you’ve set aside enough cash to cover financial emergencies that may happen in your future. An emergency fund or financial safety net should be large enough that you can cover your fixed expenses for roughly six months should you get laid off.
Six month’s worth of wages can take a while to accumulate, so it’s important that you have a backup plan should a sudden bill, repair, or medical emergency occur before you’re ready. For urgent assistance, personal online cash loans offer an alternative to conventional financial resources. When you face a bill or household repair that needs immediate payment, check in with online direct lenders, like MoneyKey. They issue quick online payday loans that you can receive in as little as one business day, making it possible to cover unexpected financial responsibilities without delay.
Waiting Until You’re Ready To Invest
Investing is the financial buzzword of the day — and for good reason. When done correctly, investing is a sound way to prepare for the future promising higher rewards than just straight saving — even when compared to a high-interest account. The thrill of taking on risks in the market in the hopes of banking a huge reward is also a lot more exciting than sitting down to make a budget. For this reason, many people jump into stocks, ETFs, and robo-advisors before they should.
There are several problems with this eager approach. When you make premature investments, you’re tying up your money in a way that can harm you down the line. Most financial advisors suggest waiting until you have a nest egg of 3–6 months of your living expenses before you put any money towards the stock market.
It’s also difficult to achieve goals on budget once you split your money this way. If you’re without both goals and budget, then you could choose the wrong type of investment. We’re not talking about jumping on the Bitcoin bandwagon when most analysts warn against it. When you leap into investments without clear goals in mind, you could invest in a long term mutual fund when really you need help with a short term goal.
The bottom line: don’t stop there
Get familiar with your finances, so you can ferret out other mistakes you’re making with your cash. It could be as simple as buying coffee every day before work or as complex as using the wrong (low interest) savings account. Just don’t be content to stop. Cutting out toxic behaviors is only the first step. Like the three examples above, you need to figure out ways to fix your mistakes, so you can manage your money properly and start saving.