What does your road to financial wellness look like? For many Americans, that path might be lined with detours and bumps. Although 75 percent look at themselves as financially savvy, some 54 percent have admitted to money mistakes that have led to debt, insufficient retirement funds, and a business in jeopardy.
A costly mistake doesn’t just affect you financially. It could even become the source of hostility between you and your spouse. Different ideas about money have been a contributing factor in divorce. So it’s critical to take control of your financial situation before it ruins you and your family.
Start by avoiding the most common mistakes in handling money.
Going off your budget
When you’ve gone rogue on your budget, expect other areas in your life to be compromised. For example, a home purchase that exceeds your budget is likely to affect what you allocate for an emergency fund, your kid’s college education, or your retirement savings. Because you now have to pay more for your mortgage, other expenses have to be reduced.
It’s crucial to stay on course with your budget, especially when you run a business. If you exhaust funds for new equipment, for example, you might have to cut back on pay-per-click ad spending. Reduced spending on marketing the business could put your company at a disadvantage.
Stick to an accurate and realistic budget, and you’ll avoid the grief of overspending.
Impulsive buying
The appeal of a popular item on window displays or e-commerce sites can be hard to beat. Some 47 percent of Americans seem to have this issue, especially those who have credit cards.
Buying on impulse can quickly snowball into living beyond your means if you rely on credit to make those purchases. Once you’re in this trap, you’ll accumulate not only debt that’s tough to pay off but also a credit score that will affect future loan applications.
The easiest solution here is to leave your credit cards at home when you’re going to the stores. Take enough cash to cover what you need to get. Reserve your credit card for more significant purchases, not everyday discretionary spending (e.g., lattes, lunch out, or gas). And pay off your balance without fail to build up good credit.
Not paying off bills on time
This is how debts become unmanageable. It’s also how you can end up dipping into your savings. When you struggle to keep up payments, expect anxiety to build up. And expect your credit score to take a hit. Because payment history is key to getting a good credit score, late payments or worse, nonpayments, will see your score plummet. And that will have major implications on future loans.
So keep track of your bills. If you have monthly payments that you don’t seem to use, like a gym membership or music subscriptions, close them. Eliminate wasted fees, and you’ll manage your monthly bills better.
It’s not easy to manage money, but it can be learned. It takes practice and discipline, and the will to meet your financial goal. Whether it’s retiring at an early age or reaching a million on your savings, achieve your goal by avoiding common financial mistakes.