With so much to consider when it comes to managing your finances, it’s easy to fall into the habit of making certain financial mistakes. It becomes even harder when many of these financial mistakes are socially accepted. But just because they’re easy to make doesn’t mean they won’t negatively impact you. The sooner you avoid these most common financial mistakes, the sooner you can set yourself up for an improved financial future.
If you need assistance with your finances, work with a professional financial advisor from Good Life Financial Advisors of Mt. Pleasant. We’re ready to help create a personalized plan for your specific needs.
Overspending
Overspending is perhaps the most obvious financial mistake to make, but it’s also one of the easiest. People often incorrectly assume that overspending only applies to major purchases, such as a car or home. While this counts as overspending too, far more often overspending is the accumulation of many small purchases. If you’re overspending in this way, there’s almost always options for cutting back without feeling deprived.
Make it a habit to take a moment before any purchase to consider if you truly need the item, and, if you do, make sure you’re getting it at the best price. If you enjoy buying clothes, start shopping at thrift stores. If you love spending quality time with friends and loved ones, start a weekly game night or explore Groupon for discounted activities. If you live for fancy home-cooked meals, consider buying more of the groceries you use regularly in bulk.
Depending on Credit
Credit card debt is easy to rack up and often incredibly hard to pay off, since it’s some of the highest interest debt. Unless you pay your credit card off in full every month, using credit means paying more. That’s why one of the worst financial mistakes you can make is assuming you don’t need an emergency fund and instead relying on credit cards.
Buying a Car You Don’t Need
Taking out a loan to buy a car is a societal norm. This is understandable if you need a reliable car and don’t have the money to buy one in full. But if you can afford to purchase a reliable used car and instead purchase a new car, you’re spending money you don’t have on something you don’t need. Even if you do have the money to pay for a new car in full, you should ask yourself if it’s worth it. If you’re a car aficionado maybe it is. But for many of us, buying a used car is the better option.
Not Saving
Many people live paycheck to paycheck and save little to no money. If this is you, you may tell yourself you’ll save any leftover money you have at the end of the month. The problem with this mindset is that if you have money, you’re almost definitely going to spend it. Instead, make it a habit to pay yourself first. As soon as you get paid, move what you can into savings. If a true emergency arises, you can always use this money. But more often than not, you’ll find that when the money is no longer there to spend, you find ways to get by without it.
Failing to Invest
Many people make the mistake of assuming that investing is only for the wealthy. But this simply isn’t true. Investing is a great way to save for long-term goals. And the sooner you start investing, the better, thanks to the power of compound interest.
One of the most important reasons to invest is to save for retirement. The problem is that retirement may feel far off and therefore difficult to prioritize. This is where a financial plan can help. When you create a plan, you’ll have to think through when you plan to retire, what you plan to do in retirement, how much you’ll need, and what you’ll have to do to reach that amount. Having concrete goals can make the process considerably easier.
Taking Your Time Paying Off Debt
This is another area where a plan can help considerably, because without a plan, it’s hard to prioritize paying off debt. And you want to pay off debt as quickly as possible, especially high interest debt from credit cards, car payments, and student loans. The sooner you pay off debt, the sooner you can put that money towards other goals. In addition, paying debt off sooner also means you’ll pay less, since there’ll be less time for interest to accrue.
Work with a Professional Financial Advisor
It’s important to avoid these most common financial mistakes. Whether you’re making one of these financial mistakes or all of them, you can choose to fix them and start working towards a brighter financial future. For assistance, consider working with a professional financial advisor from Good Life Financial Advisors of Mount Pleasant!
