Money management is critical to your future. It is okay to live dangerously from time to time – no one said you have to be perfect. But here are some of the worst financial mistakes. Avoiding these poor habits may result in your ability to take charge of your financial outcome.
1. Not paying bills on time
Want to ruin your credit score? If you do than you won’t want to pay your bills on time. But, who wants to do that? To avoid this mistake, pay your bills on time. If you have difficulty remembering the due dates, set up automatic payment reminders with your bank. Billpay and other auto-payment resources are often available through the company you are paying. This is great way to avoid late fees and save your credit score.
2. Not monitoring your credit
It is important to review your credit report and score annually to ensure there are no errors or fraudulent activity. Identity theft is a real problem and many times it can be prevented if you are aware of errors and issues with your credit. Many companies offer specials and free reports yearly.
3. Not having an emergency fund
Not having enough savings for unexpected medical bills, job loss, or other emergencies leads to problems and financial hardships. An emergency fund is designed to prevent you from going broke in the event of a sudden change in financial status or large bill pops up. Aim at saving approximately six months of living expenses.
4. Not having a budget
One of the most common financial problems that can easily be avoided is not having a budget, or not sticking to it. Your budget is simple. It is the income received minus your expenses. The difference between these two numbers is the money you are allowed to spend. Overspending leads to trouble. A budget is needed if you want to stay on the right financial track. It helps you with responsibility and ensures financial security.
5. Paying the minimum on credit cards
When you fail to pay off the credit card balance in full each month, you rack up a lot of interest charges. Over the lifetime of the balance, you can easily pay hundreds or thousands of dollars in interest. If you are not able to pay off your credit card balance each month, make sure you pay more than the minimum and always pay your bill on or before the due date to avoid late fees.
6. Avoiding retirement savings
One of the worst financial choices young people make is not planning ahead for retirement. Instead of blowing the funds on living expenses or must-haves, take advantage of your employer’s retirement savings plans. Your company may offer a matching contribution to the percentage of savings you invested. This is a great way to earn more money without it costing you a dime.