Whether it’s your first time taking control of your finances or you have been managing your expenses for quite some time, you may be committing a few mistakes.
Most of them are not significant missteps. Therefore, you may not notice their effect on your wallet unless you’re looking for it. However, these effects do add up over time. If you do nothing to fix them, they may cost you hundreds or even thousands of dollars you never had to lose if you’d been paying attention in the first place.
Nip the problem in the bud by knowing the most common, yet lesser-known, money mistakes you’re probably making right now:
Not Caring About Interest on Your Purchases
There’s nothing wrong with using your credit card when purchasing essentials. However, you must be smart about your spending. Many people have no qualms about paying double-digit interest rates on groceries, gasoline, and other items before their bills are paid.
Remember— nothing comes free in the world of money. The convenience of the buy-now-pay-later scheme, aka credit card purchases, comes in exchange for paying interest on what you bought.
To offset these fees, you’ve got to be really disciplined when it comes to your credit card spending:
- Learn all about your credit card’s interest rates and additional charges before signing up.
- Pay off the purchase as soon as you can.
- Already got credit card debt? Pay more than the minimum. Otherwise, you’re only paying off the interest and not making a dent on the principal.
While undisciplined use of your credit cards can land you in debt and even bankruptcy, using it wisely can help your credit score and overall finances. The key is to see beyond the convenience and treat your credit cards as a tool for better money management.
Disregarding Financial Changes
Most people are guilty of this because the expenses involved are easy to overlook. For instance, if you are still paying for a spa membership monthly despite not going to the facility for weeks, you are wasting a lot of money. To avoid such a scenario, take stock of your finances regularly. Ask yourself these questions:
- What is your current state of income?
- What expenses do you have monthly?
- Which of these do you still use? Which ones are you merely continuing to pay for?
- Are there cheaper options for your purchases or memberships right now?
- Are there any lifestyle changes in your life that can affect these expenses?
Track down where every dollar was spent and determine if they were worth it. If they aren’t, you must make the necessary changes to rectify this. Do this reevaluation every time your financial circumstances change, such as when you get a raise or lose a side income.
Excessive Spending on Frivolous Purchases
Significant savings are often depleted one dollar at a time. Buying a deluxe cappuccino every day before work may not seem like a big deal, but it can total a significant sum.
This type of excessive spending is insidious because you tend not to notice it. The only thing you see is that at the end of the month, you have very little money, and you have no idea where you spent it. Some of the most common frivolous expenses are:
- Ordering take-out food frequently.
- Buying clothes according to the latest fad.
- Keeping up with gadget trends.
- Not having a plan when going shopping, which can result in going over budget.
Be smart with your money, especially if you are experiencing financial hardship. Evaluate if you really need that item you want to buy, or if it’s just a want that can wait for another time.
Falling Behind on Your Payments
When you fail to pay your bills on time, you enter a cycle that’s difficult to break. This can cause your pending payments to accumulate and degrade your credit score, which will have a negative impact on your finances in the future.
Stay on top of your bills. If you’re falling behind, budget your income strategically and hold off on non-essential purchases. Below are some ways to achieve this:
- Automate your payments. Arrange for your bank to automatically subtract bill payments from your account at a specific time, such as when your paycheck hits every month. This will reduce your chances of spending the money on other things before you pay your bills.
- Finding it hard to catch up on payments? Call your creditors and try to negotiate a more affordable payment plan.
Staying at Your Job for Too Long
According to Forbes, staying employed in the same company for more than two years will make you earn 50% less in your lifetime.
Not ready to leave your current job? The best way to avoid the income decline without leaving your company is to ask for a raise. If a salary increase is not in your future, start searching for better employment. Your social security benefits will thank you as they are based on your earnings history.
Living Off Payday Loans
If you’re frequently using payday loans to finance your month-to-month expenses, you’ll be in massive debt before long. These loans prey on desperate people that will snap up ridiculous interest rates just to tide them over. Before you take out any loan, make sure you read the fine print. Look for things like:
- How much the interest rates are?
- How many days you have to pay?
- What will happen to your collateral in case of late payments?
While relying on payday loans may be unavoidable sometimes, prioritize paying them to avoid interest from accumulating.
Pay Attention to How You Use Your Money
It’s easy to take money for granted, especially when you have a lot of it. Don’t wait until you’re rummaging for those last few dollars before you start paying attention to what goes in and out of your budget. From being wiser about your credit card use to avoiding payday loans and falling behind on due dates, watch out for these pitfalls that can drag down your finances.
Tycoono, LLC and its affiliates do not provide tax, legal, financial or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, financial or accounting advice. You should consult your own tax, legal, financial and accounting advisors before engaging in any transaction. Please refer to our disclaimer for more information.