Managing your money may seem straightforward and easy to some people who are natural born “number-people.” However, for many people managing their money is much harder than you think. They struggle to find financial stability and dream of long term wealth, yet it seems forever out of reach.
The good news is that you don’t have to fall on one extreme or the other. It’s possible to learn from other people’s mistakes before you and adapt the tips of smart money managers and apply them to your own lifestyle. Understanding the most common mistakes can help you better your financial decisions, and ultimately build your wealth. Here are some of the most common mistakes people make with their money and how to avoid them.
Not Saving for Retirement
If you’re one of those people who is procrastinating about saving for retirement, then you’re not alone. And while this is a common mistake it doesn’t mean it’s not going to do you any harm! It can be an incredibly costly mistake long term, as the earlier you start saving, the more you’ll accumulate and more you can retire in comfort.
Contributing to a retirement account like a 401K or an IRA means your money will have time to grow things to compound interest over the years. If your employer offers any matching contributions, then go for it— this is a huge advantage! Ideally, you should save at least 15% of your total income for retirement. Yet if you’re starting late, you’ll probably want to see even more.
Not Putting Aside an Emergency Fund
Life is one of those things that can change at any moment. You never know when something could happen that could turn your entire world upside down. That’s why having an emergency fund is so important for those unexpected moments.
While many people rely on their credit cards, or even borrow money from family when they need a large amount of cash, the people with financial smarts turn to emergency savings. Whether your car is broken down, or you require emergency surgery, knowing that your fund can help you out in a pinch.
Carrying Too Much Debt
Make no mistake about it, credit cards can be a great tool, particularly when it comes to building your credit over time. However, relying on your credit cards as an actual source of income is unwise. That’s because you carry too much debt, and this debt will loom over you for many years. Instead of carrying high-interest debt, use your credit cards as a tool, and pay each card off at the end of each billing cycle. Even though making minimum payments can be appealing, it’s one of the biggest mistakes you can make when handling your money!