When it comes to money management, mistakes can occur over time. No one is perfect and financial miscues can potentially lead to smarter decisions in the future.
That said, there are a variety of mishaps you can sidestep with preparation and planning. Here are six money mistakes to avoid:
1. Not paying down credit card debt
Charging up credit card debt can sneak up on you. A shopping trip here, a dinner with friends there, and suddenly your balance is growing faster than you expected. If this becomes a trend, you might be shocked the next time you receive your monthly statement.
If you have high credit card debt, the first step to paying down your balance is to stop using the card. Interest is typically charged on your existing balance1, so if you carry a large balance from month-to-month, these charges can be costly. In addition to not using the card, make your payments on-time and try to pay more than the minimum due.
2. Not having an emergency fund
A tree falls on your car. Your washing machine breaks. You suddenly need a root canal. There are many situations that could qualify as a financial emergency. It may not be a matter of if but when.
That's why building an emergency fund is so important. If an unexpected situation does arise, you might be able to cover the costs without touching your primary checking and savings accounts. Dealing with the emergency could be enough to handle. Having these funds ready could ease the financial burden and help avoid additional stress.
3. Not saving for retirement
According to one nationwide survey, the top financial worry of Americans is whether or not they'll be able to save enough for retirement2. A different study showed that most individuals will need at least 70% of their pre-retirement income to maintain their current lifestyle during retirement3.
With that in mind, the earlier you start saving, the better. If you have a target amount you want to hit, you need to create a plan and get started. If you’re currently saving but don’t feel confident you’ll have enough, take a good look at your projections and make adjustments where necessary. For additional tips, try these smart ways to save for retirement.
4. Not paying bills on time
If you miss a due date on occasion, you’re not alone. A 2015 survey by the National Foundation for Credit Counseling states that roughly 1 in 4 American adults don’t pay their bills on time5. In addition to being late on that account, these actions could affect other aspects of your finances.
One major consequence of late bill payments could be a drop in credit score. Payment history is important to credit scores and even one late payment could make a significant impact4. If you need help paying your bills on time, try setting due date reminders on your phone or writing them on a calendar.
5. Not preparing taxes correctly
When it comes to preparing your taxes, simple mistakes could cost you serious dollar signs. Whether you do your taxes by hand or via the internet, ensuring that every detail is correct could pay off when you get your return.
Here are some common tax mistakes to avoid:
- Not filing on time
- Missing or incorrect information
- Mathematical errors
- Filling out the wrong forms
6. Not having a will
Writing a will isn't something most people like to think about. In fact, a survey by AARP, Inc. shows that 2 out of 5 Americans over the age of 45 don't have a will. No matter how uncomfortable it may seem, taking the time to write your will can save your loved one's time and money in the future.
Documenting your wishes on paper may also keep your heirs and surviving family free from unnecessary legal hassles and confusion. Most of all, it should give you peace of mind that your possessions and money will end up in the right hands.
Stay on guard
People make mistakes; it’s a fact of life. However, some issues can be avoided by keeping a watchful eye and being mindful. If you identify with some of the money mistakes in this article, make a commitment to be more attentive in the future. You can do it!