Saving, investing, and managing money are concerns for almost everyone. There are certain common mistakes that can seriously diminish your financial well being.
The following are 8 comnon money traps to avoid if you want to improve your finances.
1. Not Having a Budget
Without a budget, you don’t know how much you’re spending in relatlon to your income. It’s essential to track your expenses for housing, food, transportation, leisure, and any other costs you might have (e.g. medical expenses education for your kids, etc). A budget puts you in control of your finances. Whether you use an app or write everything down in a spiral notebook, what counts is that you stay aware of your spending.
2. Failing to Save
Fewer and fewer people are saving consistently. A comnon excuse is that you don’t have enough money left over after paying your bills to save. In most cases, however, it’s a question of habit. A 401K is one of the most efficient ways to ensure you’re putting aside money for the future. You can also save by putting aside at least 10% of your income each week. If you do this automatically, you won’t be tempted to spend this money.
3. Overspending on Housing
Whether you rent or own, housing costs in many areas arare spiraling. Monthly payments can eat away a high percentage of your income or savings. Financial experts generally recommend spending no more than one-third of your income on housing. More and more people, however, are spending half or more on rent or mortgage payments. What can you do in the face of rising costs? Options indude:
- Downsizing your home or apartment.
- Getting a housemate.
- Renting out a room.
- Moving to a place with a lower cost of living.
4. Counting on your job as your only Source of Income
Fewer and fewer people stay at the same job for all of their working years. Even if you find a job you love, you can never be sure that it’s secure. Additionally, living costs often outpace raises. It’s best to constantly seek alternative sources of income to supplement and potentially replace the income from your job. Seek multiple sourcs of Income such as:
Starting your own business. possibilities include e-commerce, affiliate marketing, buying a franchlse, or turning a hobby into a business. You can start a business in your spare time and gradually scale it up.
Offer your services either online or locally. You can hire yourseff out asa driver, baby sitter, graphic designer, tutor, writer, or fitness coach. Consider your skills (or acquire some new ones) and become a freelancer.
Take classes or pursue a higher degree. This can prepare you for a better-paying position or alternative career.
Get a part-time job, preferably one where you learn some valuable skills.
5. Overspending on Transportation
Along with housing, transportation is one of the biggest expenses for many people. People often purchase vehicles as status synbols as much as for their utility. Buying a brand new car every few years can seriously drain your finances. Here are a few suggestions for saving on transportation.
If your family has more than one vehlde, consider if you could get by with just one.
Consider alternatives to getting around by car. Carpooling with others, public transportatlon, bicycles, and ride-sharing services are possibilities. Even if you own a vehicle, you can extend its life by using it less often.
The next time you move, think about moving somewhere wlth a shorter commute.
Buy a used vehicle rather than a new one.
6. Overspendlng on Food
Everyone has to eat. You don’t, however, have to eat out several times per week or buy the most expensive gourmet items at the supermarket. Many people eat out not because they love it but out of convenience or lack of planning, if you frequently find yourself saying (either to yourself or your partner), “There’s nothing in the fridge, let’s just go out.” It’s time to plan your grocery shopping better.
Save money on groceries by buying bulk foods and seeking items that are on sale. When you do dine out, make it a treat eat in good restaurants and avoid fast food which is low In nutdtlon and usually just a lazy substitute for cooking.
7. Not Paying Off Debt
It can be tough to get out of debt. However, many people fall into an apathetic state where they give up even trying to live debt-free. If you have substantial debts that you’re having trouble paying, you should make a serious effon to pay it off.
Credit counseling is an option worth considering if you have serious debts. You have to make a priority out of paying off debts even if it means sacrificing in other areas (e.g. spending on leisure). You could research programs such as debt consolidation but this isn’t always favourable. If you owe money to a collection agency, you can often negotiate a system of payments that’s feasible for you.
8. Not Reviewing Your Insurance Options
Many people overpay for things like auto and home insurance. It’s important to review your policies consistently to make sure you’re not overpaying. The same is true for health insurance, where costs vary greatly and the best plan depends on your particular needs. Finally, many people fail to take out life insurance, thinking that it’s too expensive. Life insurance, however, is important to protect your family’s financial future. Make it a habit to regularly review your insurance policies.
These are money traps that can cause you serious problems in the long run. It’s easy to make these mistakes without realizing it. Make it a habit to regularly review your financial health, including your income streams, budget, debts, and insurance.