People are always looking for ways to save and make money, but not everyone makes the best decisions regarding their finances. Even if you have good intentions, you might be making some big mistakes when it comes to saving or spending money. In order to prevent losing or spending your money unwisely, you should first understand the biggest money mistakes you might already be making.
That way, you can be aware of the decisions you are making in the future.
Not Budgeting Cash Flow
The most important thing you can do with your money is budget it; account for everything down to the last cent.
Many people think that as long as they monitor their spending and their income that they will be fine, however, this is simply not true.
It may seem like a big task, but sitting down and seeing where every dollar goes will make sure that you are not spending too much or saving too little.
In addition to your income and miscellaneous spending, you should also be accounting for the debt you owe, insurance policies, student loans, taxes, and more.
The more thorough your budget is, the easier it will be to prevent yourself from spending money unnecessarily or putting too much money into your savings account, and not enough into your retirement plan.
Not Saving for Retirement
To go along with the previous mistake, many people do not save for retirement.
When you are in your 20s and 30s, and sometimes in your 40s, it is easy to shrug off setting aside money for your retirement. However, it is much better to start saving for your retirement now.
As you start your retirement fund, you should understand where this money is coming from.
For the most part, your retirement plan with be funded by the disposable cash you have from your annual income, Social Security benefits, a retirement plan sponsored by your employer is applicable, and any assets you wish to include.
Spending More Money than You are Making
Not having an appropriate budget can mean you are spending more money than you are making each month without knowing it. After taxes, paying bills, and setting aside money for your savings, the money you have left is considered your disposable income. A disposable income can be used for going out, entertainment, or for irregular expenses like auto repairs.
In order to make sure you are not spending over your monthly disposable income, budget your expenses for each month and subtract the necessary payments you will have to make.
After that, anything that is left can be used for whatever you want.
Not Having an Emergency Fund
It may not seem like such a big deal, but having an emergency fund can be a big help.
Your emergency fund should be liquid cash that you can keep safe at home so that you have it ready if needed.
Some financial planning experts recommend having a few months’ worth of money from your income to put in your emergency fund. This fund will be available to you in case you lose your job, need to pay emergency medical expenses, or if you are short on cash when paying bills.
No matter what your emergency may be, not having a fund specifically for emergencies is a big money mistake.
Refusing to Prepare Your Estate
Many people believe that there is no need to prepare their estate while they are young and healthy.
Just like a retirement plan, you should always be saving for the future. While it may be hard to think about now, you need to plan your estate now while you are still able to make your own decisions.
Having a life insurance policy and a will set up now will make it easier on your family in the future.
You do not want to leave your family with debt because you did not have a plan in place.
Now that you are aware of some of the biggest money mistakes, you can make sure that you do not make these mistakes in the future.
Being smart about your money is a good way to ensure you are prepared for the future and anything life throws at you.