If you work hard and just can’t seem to get ahead, you’re in good company. According to a 2014 study by the U.S. Federal Reserve, only 48% of Americans could cover an unexpected $400 expense without borrowing money or sell something. Taking control of your finances may be easier than you think. Here are five common mistakes that may be keeping why you’re still broke:
You’re spending money you don’t have. “Don’t buy things you can’t afford” should go without saying, but our credit card culture makes it easy to buy now and figure out how to pay later. If money is already tight, the last thing you need is to accumulate interest and create new monthly obligations.
The simple solution: Avoid using credit cards to purchase anything you won’t be able to pay off in full when the bill comes. It will take a little discipline, but you’ll see the benefits when you stop throwing away money on interest and late charges.
You have no financial buffer. Living paycheck to paycheck is dangerous. An unexpected car repair can throw off your whole payment schedule for the month. Depending on your income and the size of the expense, it may take weeks or months to catch up, while late fees and interest pile up.
The simple solution: Put aside something every pay period, no matter how small that amount might be. Even a small savings account or emergency fund can prevent the snowball effect and minimize the fallout from those “unexpected” expenses.
You’re too easily surprised. Even minor surprises can derail your budget, especially when they add up. Maybe a friend a friend’s special day requires an expensive gift, a toothache triggers an unscheduled trip to the dentist or it’s just time for an oil change. When these relatively small expenses come one after another, they can be as harmful to your financial stability as one large expense.
The simple solution: Don’t let these expenses take you by surprise. Experts say that most of us have a few each month, so plan your budget accordingly. The best way to plan accurately is to track your expenses and determine how much you’re putting toward “unexpected” costs each month.
You’re not counting the small stuff. You’ve been hearing about the price of your morning latte for years, but most people still aren’t doing the math. Expenses so small that they don’t fully register can be deadly—especially since few people adequately budget for them.
The simple solution: Write down every single financial transaction for a month, down to putting a quarter in the parking meter or giving your kid a dollar for a frozen custard. Yes, it will be tedious, but the information you gather will be invaluable.
In tough financial circumstances, the natural inclination is to look for a large-scale quick fix. Don’t wait! Acting to avoid these simple traps will put you on the right path today.