The average American’s savings account balance is only $4,500. Of course, many people have much more than this. Many have no money saved up.
Saving money can be challenging for anyone, but it’s even more complicated if you have bad money habits. Many things that might seem insignificant are standing in the way of your financial goals.
We’re here to talk about them. Read on to learn all about a few common mistakes people make with their finances.
1. Relying on Credit
Using a credit card is important so you can build credit, but you can’t rely on it. Use your credit card for small bills and purchases that you know you can pay off. Otherwise, you may lose control of your credit score.
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2. Taking Out Payday Loans
Payday loans are always a bad idea. They’re high-interest, so even if they seem reasonable initially, you’ll spend far more on them than you assume.
3. Paying Bills Late
You should always try to pay your bills on time. You could accrue late fees if you try to pay after the due date. It can also benefit you to pay early when you can.
If necessary, see if a payment plan is an option if you can only contribute a small amount of money at a time.
4. Spending Beyond Your Means
From time to time, everyone makes large purchases and “treats themselves.” It’s okay to do that, but make sure those “treats” aren’t familiar.
Don’t try to keep up with other people you know who may be spending money more frivolously. They may have poor money-management skills, or they may be able to afford a different lifestyle.
5. Not Investing
Saving is important, but investing is how you grow your money and (hopefully) beat inflation. Learn how to invest in stocks, real estate, precious metals, and anything else that may increase your wealth.
When in doubt, work with a professional who can guide you through smart investing choices.
6. Not Saving for Retirement
If you’re young, retirement might seem like a far-off thought. With the current state of things, you should be saving for retirement, regardless of age.
Calculate how much money you’ll need in order to retire and start working toward it.
7. Not Boosting Your Credit Score
Your credit score is important. You’ll have an easier time getting loans, getting a mortgage, finding good rentals, and more.
You should practice good credit card habits and potentially even work with a credit union!
8. Not Paying Off Debt
One of the best things you can do for your financial health is to pay off your debt.
Debt accumulates interest. Whether it’s a car loan, a federal student loan, or any other type of loan, you will be paying more than the loan is worth.
Pay it off quickly to minimize the amount of interest you have to pay.
Speaking of debt, you should also look into student loan forgiveness to see if you qualify.
9. Not Price Shopping
When you want to buy something new, frivolous or not, shop around. You don’t have to buy a cheaper version of the item, but see if other stores have the same thing for a lower price.
You can also see if any stores have discounts or coupons you can use to save money.
10. Not Making a Budget
Everyone should have at least a loose budget. If money is tight, your budget will be more specific.
Divide your money each month into categories. There should be a “necessities” category, a “savings” category, and a “fun” category (for most people). You can then divide those categories further with things like bills, savings account vs investment accounts, and so on.
Track your spending to make sure you’re never going over budget.
11. Impulsive Spending
It isn’t easy to not spend money impulsively. Curb impulsive spending by waiting at least 24 hours before making a purchase.
This should be for both large and small purchases. Whether it’s a new phone or a new rug, make sure you actually want it before you spend money on it.
12. Forgetting About Subscriptions
How many subscriptions do you have? Between streaming services, memberships, and subscription boxes, many people have reoccurring monthly bills for things they never use.
Take a quick subscription account survey to determine what you’re actually spending money on. Get rid of anything you’re no longer using. You can save hundreds of dollars per year this way.
13. Not Setting Finacial Goals
It’s hard to save money when you don’t have a goal in mind. You will save more money (and spend money on better things) if you’re tracking your own personal finance goals.
Do you want to buy a home? What about going on a big vacation? How much money do you want to put into your savings and checking account monthly after bills?
Note these things down and start working toward them.
14. Not Putting Money Into Savings
You should have a general savings account. Try to choose one that has a decent interest rate so you can gain a small amount of money when it’s in the report. It won’t be as advantageous as investing it, but saving it is slightly more secure.
Pay bills put money into savings, and spend the excess later.
15. Not Paying Taxes
If you’re not reporting all of your income, you’ll save money short-term but lose it in the long run. You may have a hard time qualifying for loans and proving income when you need to.
16. Relying on Cash Advances
Cash advances are only for emergencies. The fee is not worth it otherwise, and if you rely on them, it’s hard to break it.
17. Squandering Your Tax Refund
Ah, tax season. You have an outstanding refund in the mail, so you want to spend it on fun things, right?
If you’re living within your means, you can spend some of your refund on whatever you like. Make sure you still put some away or use it to pay off bills.
It’s always best to put that money into savings if it’s possible to do so.
18. Overpaying for Necessities
When it comes to necessities, you don’t have to overpay.
At the grocery store, shop around for the lowest prices without sacrificing quality. Buy store-brand things.
The same is true for “basic” clothing and household items. You can splurge if you can afford it, but if not, don’t be afraid to buy the store-brand versions.
19. Not Having an Emergency Fund
The average American is one emergency away from financial ruin. You should have money set aside (in your savings account or otherwise) to prepare for such a thing.
You don’t want to put yourself into debt to handle an emergency. Start saving now.
20. Using Out-of-Network ATMs
This is a small one, but it adds up over time. When you need to withdraw money, always use an in-network ATM. Otherwise, you’ll be paying (often ridiculous) fees, sometimes on both sides.
21. Buying Poor-Quality Items
We mentioned that overspending on necessities was a bad idea, but underspending is also not ideal. While we understand that often you have to buy a poorer-quality item within your budget, do your best to spend more money on things that you use frequently (or find better-quality versions secondhand).
Let’s say you buy a pair of fast-fashion jeans. They were $20. Due to their poor quality, they fall apart in only a few washes, so you have to buy another pair.
A more expensive pair will last for more washes, meaning you won’t have to repurchase.
22. Renting Beyond Your Means
This one is tricky.
If you’re renting right now, you’ve likely experienced rent hikes. If your rent is no longer affordable, and you can do so, you may have to downsize or find roommates.
This is a temporary situation that will allow you to save money.
23. Not Having Insurance
Insurance is expensive, but not having it is more costly. Health insurance, car insurance, and even dental insurance will (ideally) save you money in the event of an emergency. It’s worthwhile.
Shop around to find insurance plans within your budget that still offer decent coverage.
24. Settling in Your Career
Are you making enough money at work? Do you find you’ve already spent all your money for the month by the time your bills are paid? It might be time to make a change.
It’s okay to ask for a raise, especially if other professionals in your field are making more money. If you can’t get an adequate raise, consider looking for new work or establishing a side hustle.
25. Making Excuses
There are plenty of reasons you may be struggling financially, some of which are beyond your control. Making excuses instead of making changes and potentially even asking for help.
There are always going to be roadblocks, but you can find solutions, even if they’re imperfect.
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