No matter where you are at in life, whether you're buying your first home or budgeting for a family, you probably have questions or concerns about your finances. Money can be a stressful topic and one that is traditionally not discussed very openly. Sometimes the best thing you can do is take small steps to help get yourself ahead. We put together some of the most frequent money mistakes we encounter so you can avoid committing them yourself!
Not saving RIGHT NOW
Or, even waiting to save last. Savings should be one of the first items on your budget. If you don’t save first, you most likely will not save later. Automate your savings. Direct a small amount from your direct deposit to a savings account you don’t see regularly and it will become second nature.
Waiting to make more money before you pay off debt
Yes, we all want to make more money but waiting for that day before you pay down debt is not a good idea. You should create a plan now with your current income and then as you make more money, increase the amount you pay towards debt. In fact, the first thing you should do when you get a raise is allocate those extra funds towards paying off debt or retirement.
Maxing out your credit cards
When you max out revolving balances like credit cards, your credit score can take a dip. The credit utilization portion of your credit score accounts for 30% so keep those balances below 50% of what is available. If you struggle with credit cards; give them to a trusted friend or freeze them in the actual freezer, do whatever it takes to keep those balances low.
Missing or skipping a loan payment
Remember how revolving balances account for 30% of a credit score? Well payment history accounts for 35% so it's an even BIGGER deal. Always make your payments on time. If you know you are not going to be able to make a payment for any reason, call your creditor to see if they will work with you. I promise they are not as scary as they sound and some may offer a skip-pay option for different situations.
Not checking your credit report at least annually
Checking your credit report on a regular basis is important for many reasons like preventing identity theft but also to keep your credit score as healthy as possible. Checking your credit report on a site like https://www.annualcreditreport.com/index.action will keep you on your toes with your credit. Verifying information and making sure there are no unexpected items on your credit report will help keep your score as high as possible.
Not saving for retirement
If you are employed, you should be saving for retirement. You can’t count on social security as your sole retirement income. While it may always be around, it won’t necessarily cover your expenses. Meet with a financial advisor and create a plan for your retirement. Start saving immediately.
Not having a budget
Budgets can be fun, I promise. If you are not using a budget are you even sure where your money is going? Budgeting keeps you accountable to yourself and your family. Budgeting can also help you pay off debt faster and give you an out when it comes to purchasing things. “Sorry, it’s not in the budget,” is a great response.
Not having emergency savings
An emergency savings account can make all difference. Do you have $500 to $1,000 if something were to happen to your vehicle? No? Well then you need emergency savings. Financial experts recommend three to six months of expenses be saved in an emergency savings account. But you can start small. Start with saving $1,000 and work your way up from there.
Co-signing a loan
Unless you are going to be co-owner of the property tied to the loan, do not co-sign. Even if it is your child or another family member. Co-signing a loan makes you just as responsible for the loan as the other party and if they don’t make their payments, your credit will be impacted negatively.
Not designating beneficiaries
I know it is morbid to think about, but what happens if you pass away? Do you have a plan in place? Even if you don’t want to prepare a will, you should at least designate beneficiaries on all your financial accounts. In the event of your death, the funds/assets transfer to the beneficiary with just a death certificate.
What were your biggest money mistakes and how did you solve them? We would love to hear.
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