You may think you are going about your finances the right way, month over month, year after year, making sure your bills are paid on time,and yes while that is important, there is actually much more to the whole financial picture. Between how much you’re spending on utilities, food, gas, spending, not to mention having saved up, it puts a lot of pressure on the one that is handling the finances. This is what makes it all more important to share the financial responsibility with a significant other you share expenses with, or even a family member, friend, or professional financial advisor that can ensure you are making the right financial moves to set you and your family up for success in the years to come.
Not Giving Yourself a Cushion
It’s often that we live paycheck to paycheck and when large unexpected charges come up, we have no choice but to put them on a credit card and risk going into debt because we were not prepared. While you cannot predict when your car will break down and require repairs, or when the dog gets sick and must get a necessary surgery, you want to make sure you have funds available that you can access when these unexpected charges occur. By having a few months’ worth of reserves saved up, you can give yourself a much-needed cushion.
Having Your Budget Fail
Creating a budget is the easy part, and it’s actually sticking to it month over month that is the difficult part. Sure, you can allocate certain funds to areas such as food, gas, spending money, but if you don’t stick to those amounts and go over every month, your budget will be out of whack and you’ll see no lift in your savings because of this. Budgets will sure need tweaking as you go on to make sure you have the correct funds aligned,but if used correctly, you should start to see more and more money freed up each month.
Living Beyond Your Means
Sure, it’s fun to go on a shopping spree, or lease an expensive car, or build a top of the line home, but if you’re living beyond your means and you see the credit card balance rise every month and your savings account continues to bottom out, it’s a sign that you are living beyond your means and you need to hone in your spending. You could see a lift but avoiding going out to eat, which could add up to savings of hundreds of dollars a month, cut the cable cord, and maybe even make sure you clip coupons when you go grocery shopping like your parents used to from the Sunday paper.
Carrying Over Credit Card Debt Month After Month
Credit cards have plenty of pros in using, but going into credit card debt outweighs them all if you cannot payoff the statement balance. By carrying over a balance to the next month you begin paying interest, which for some cards is upwards of 16%, so the higher the balance, the more your monthly payment can be going towards interest instead of the balance itself. Easier said than done of course, but if you can pay off the full statement balance each month and set spending boundaries, you should be in good shape going forward.
Missing Out on Free Money
If you can keep spending until control, probably the best reason to use a credit card is for the rewards, and could even be argued it should be used for every purchase so you don’t miss out on free money. By making the purchases you were going to make anyways, you can watch the points or cashback add up just by swiping. Also, when it comes to your 401k at work,make sure you are contributing the maximum for company-matching contributions or you could be missing out on thousands of free dollars a year, not to mention tens of thousands over time to what it could have grown to by the time you’re ready to retire.
Forgetting About Your Future
Speaking of retirement, I know you don’t want to think about it right now as it could even be decades away, but the longer you have, the longer your money has time to appreciate, so it’s time to make the maximum contributions you can afford right now, and continue to increase each year so you ensure your account will be fully funded by the time you are ready to walkaway from work and just enjoy the life experiences you’ve worked so hard for.