We all make decisions that we regret, but a bad financial decision can haunt us for years. You might feel too young to start thinking about retirement, or want to splurge on a fancy new car – but how will your finances look in ten years’ time? Change your spending habits now to secure your finances in the future.
1. Not Sticking to a Budget
Nobody really likes budgeting, but you should know that it’s an incredibly important thing to do. Instead of thinking of budgeting as not being able to spend your money on things you want, use it to recognize areas that you are wasting money on. By having a budget, you can save for your future and break out of the paycheck to paycheck cycle that you might find yourself in.
2. Not Paying Off Credit Cards Every Month
This is something a lot of Americans struggle with. Debts start racking up, you pay the minimum monthly amount to keep the interest at bay – but that’s all. Before your credit rating drops you need to remedy any damage.
First, stop using your credit card for money that you don’t have. If you can’t pay off your balance, it’s an extremely vicious cycle. If you don’t have access to a cash supply that can pay back your debts, transfer the balances to a 0% APR credit card so it’ll be safe from interest. Then, start to pay off as much as you can each month.
3. Blindly Buying a Financial Product without Investigating First
This might sound surprising, but many investors have invested a large chunk of their savings into investments that they couldn’t explain to a friend or neighbor. If you’re planning to take a risk on your money, do as much research as possible and understand how the investment you are interested in works.
Ask yourself, how much is it going to cost? Are there any surrender charges? You need to know the answer to these questions before making any financial decisions. If you need a second opinion, ask a financial advisor that you trust.
4. Not Having an Emergency Fund
An emergency fund will protect you through the rough patches during your life. From your car breaking down to losing your job – you never know what can happen, or when. It’s usual to have anywhere from 3 to 12 months’ worth of living expenses in your emergency fund to protect you if disaster strikes.
If you’re single and living alone, you’ll likely need more money to cushion yourself. Whereas, if you’re married and both you and your spouse work, you won’t need as much because you can still rely on one salary. Make sure you always keep your emergency fund in an easily accessible account, like an online savings account. Also, after you’ve used your emergency fund for any reason – make sure you replenish it.
5. Buying a Brand-New Car That You Can’t Afford
A car is important and necessary to a lot of people, but don’t be tempted to buy one that you can’t afford. The average car payment in America is around $600 per month and takes 6 years to fully pay off. Instead of committing to a huge chunk of your earnings being eaten up consider buying a used car. There are many that are just as reliable but come with a price tag that is thousands of dollars less.
6. Trying to be a DIY Investor When You Have No Idea What You Are Doing
Unless you are a financial professional or have had some financial education you can make a real mess of the stock market. If you don’t know what you’re doing, enlist the help of a financial advisor. There is one potentially disastrous scenario that can happen to older couples.
Likely, the husband has been in charge of the couple’s investments for years, with the wife knowing little to none. Then, something happens to the husband, and she doesn’t know the difference between a stock and a bond. To save yourself from a situation like this in years to come hire a financial advisor that you can rely on in case anything happens.
7. Not Taking Out Life or Disability Insurance
Hypothetically speaking, if you die will your family be financially ok? If you just answered no to that question you need life insurance. You also shouldn’t delay putting disability insurance in place, or long-term care insurance if you are aged 60 or older.
You might plan on living and working for a long time, but the world might have other ideas. Just like having an emergency fund, insurance policies play a similar role in cushioning the blow. How tragic would it be, if your family was left to fend without you? Not only mourning your loss but broke too.
8. Putting Off Your Retirement Plan
The earlier you start saving for retirement, the better off you will be in the long run. Nowadays, pensions rarely exist, and it’s up to you to make payments into your 401(k) or IRA. If you only start to save during your 50s, you might never be able to retire. And if you were thinking of trusting Social Security, think again. Social Security benefits aren’t very likely to maintain your lifestyle unless you can live on roughly $100 per month. There is no time like the present, and if you’ve got some time on your side, even better.
9. Neglecting Important Money Conversations with Your Spouse
If you’re married, it’s important that you and your spouse are on the same page financially. You need to have the same financial goals, and regularly discuss and agree on strategies for retirement, etc. If you are both heading down the same financial path, it’ll be a lot easier later on in life. You’ll be better prepared for things like retirement, and two salaries have much more saving power than one.
10. Being Blind to Your Recurring Expenses
Your monthly costs can be expensive. And a few subscriptions that felt inexpensive can soon add up. Take a look at your finances and cut back on things you don’t need or use. If you have a large cable bill, see if you can get a discount or think about cutting the cord.
The same goes for an expensive gym membership – if you don’t work out enough to justify the cost consider working out at home instead. Do you need Apple Music and Spotify? Do you need Netflix, Amazon Prime Video, and Hulu? Probably not. Cut back, and funnel the money you would have spent into your savings account instead.