No one is perfect with their finances. Even the most consistently brilliant financial gurus make mistakes from time to time. But there are certain actions that almost always lead to bad situations. These are four bad personal finances blunders to abandon forever.
Not Creating a Budget
Budgeting is one of the most effective ways to ensure that you have enough money to cover your expenses. A lot of people still don’t do this simple thing even though it’s one of the best financial decisions. In fact, only about 40 percent of U.S. households are currently running with a budget.
Here are a few things to keep in mind when building your own personal or family budget:
- Make sure you keep track of all your income and expenses. If you don’t track even a small portion of either, you’re going to completely negate the accuracy of your budget.
- Divide your cashflow between fixed and variable amounts. This will make it easier for you to estimate how much you’re going to bring in and spend every month if you have some fluctuations.
- Categorize your budget to make it even more effective. You can start by dividing between essential and non-essential costs. But you can go even farther by putting things into their own classes, such as transportation, groceries, entertainment, subscriptions, rent, and others.
Getting Carried Away with Credit Cards
Credit cards are incredibly convenient. This is part of what makes them so dangerous for consumers. The ability to just charge your card whenever you feel like it often leads people to make too many unneeded purchases.
Here’s the thing about credit cards: They aren’t a good form of debt. At all. You’re going to be paying an exorbitant interest rate if you carry a balance from month to month. That means you can end up paying much more in the long run than the actual price of the purchased items.
Some people also get sucked in by the allure of bonus points. Don’t fall for this. Cash back and other benefits are only helpful to you if you pay off your balance in full every month. Otherwise, you’re going to still end up losing money due to interest payments.
People who have gotten into serious trouble with credit card debt may need some assistance to get out. As many Freedom Debt Relief reviews testify, working with a trustworthy debt relief agency is one way to get a grasp on spiraling credit card debts by potentially negotiating a settlement less than your current balance.
Not Saving When You Can
It’s hard to save money. This is especially true because things have gradually become more expensive for the average consumer. In fact, regular living expenses are most often cited as the reasons why people can’t save more money. About 40 percent of adults say they couldn’t cover a $400 emergency expense.
While these statistics are bleak, there are also plenty of people who could be saving more, but don’t. This often comes down to psychology. People’s brains tell them to produce more than save. Trying to overcome this mindset can be a huge help to your finances.
Trying to Keep Up with Appearances
We’ve all heard of the phrase “keeping up with the Joneses.” This got its origin from people feeling like they need to always stay on pace with the people around them. For instance, if the neighbor gets a new car, you need to get a new one too. People can also feel this pressure in the workplace.
While it’s easy to fall into this mindset, it’s totally detrimental to your financial health. Only get things because you need them or because they make you happy. What’s the point of making money if you’re only using it to impress others?
It’s not easy to always be on top of your finances. Things come up and can cause you to fall behind in important ways. Avoiding some of these key mistakes, however, can make it much more likely you’ll be able to get back on track.