While there are signs that the economy is improving, it will still be a long road to full recovery. It’s more important than ever to make sure your money is working as hard as it possibly can. One way to do this is to eliminate simple money mistakes that can turn into big problems over time. While avoiding these four mistakes won’t guarantee economic success, doing so may help you thrive in the long run.
Oops 1: Playing Follow the Leader
Did you dig through your jewelry box and head to the Gold Guys the day after you heard that Aunt Irene received $600 by selling a gold necklace? Have you been scouring the local paper for homes to buy because prices are hovering at record lows?
If you aren’t basing your decisions on your own situation or circumstances, you could be hurting your pocketbook. Instead of jumping onto the bandwagon for whatever the latest financial trend is, take a moment to stop and think about how this fits into your long-range money plans. Consider taking a proactive approach, rather than reacting to what others have done and following suit. No matter what the news says about the stock market or the price of gold, make sure you are basing your financial decisions on your goals and the risks you are willing take. Avoid basing your decisions on emotion, or you could be in for trouble later on. And remember: what goes up will inevitably also come down.
Oops 2: Not Paying Yourself First
It’s becoming clear that the dream of a comfortable retirement isn’t going to possible without some hard work on your part early on. While we’ve all heard this more than once, are you doing anything about it? Do you mean to save, but always find something else more important to spend your money on?
If you tend to save only what is left over after all the bills are paid each month, chances are, you aren’t saving enough. Paying yourself first is key. If your employer offers a match on your 401K, you absolutely must max out your contribution to the amount they will match. If you can afford to contribute more, do so! The power of compounding interest is something you can never get back. If saving isn’t your strong suit, trick your brain by paying yourself just like you’d pay your electric bill each month. Add this “savings bill” to your monthly pile, deposit the funds in a separate account and make it non-negotiable each month. You could also consider setting up an automatic transfer from your checking to savings account. If you can’t see the money, you won’t spend it.
Oops 3: Not Planning For Emergencies
Jobs aren’t guaranteed. Accidents can happen. The fridge can go out in July when the thermometer reads 100*. These unexpected occurrences are exactly the reason you need an emergency fund set up.
While the money in this fund will never be for a fun purchase, it will prove to be a lifesaver should you hit on tough times. Having cash on hand that you can use for an unexpected expense, or to pay bills should you lose your job, is vital. This will keep you from using credit and paying interest, or from pulling money out of your retirement fund. Aim to put at least a portion of each paycheck into an emergency fund, and vow not to touch it unless it is actually a true emergency. Again, consider setting up automatic transfers to make sure the money makes it into your emergency account, not the department store cash register at the mall.
Oops 4: “If It Isn’t Broken, Don’t Fix It”
We visit doctors for yearly health checkups (or we should). Why would we treat our finances any differently? Regardless of whether your finances are currently in tip-top shape, it’s a great idea to review them to look for potential strengths and weaknesses. This is especially important now, as the economic climate has changed enough that you might need to adjust your saving strategies.
If your finances could use some help, don’t let fear keep you from asking. The best way to deal with financial problems is to address them early and head-on. Many creditors are more than willing to work with you, but this can be much easier while you still have time to turn things around.
Do you have any other mistakes that should make the list? Let us know in the comments.