Money blunders are widespread, even if you feel like you have your finances under control. But knowledge is power! This guide covers five classic mistakes that mess with your finances and how you can prevent them.
Forgetting (Or Ignoring) Your Budget
Everyone has those few days (or few weeks) where life gets away from them and they’re “too busy” to budget. Yet that’s often where most of your money management goes off the rails. This is the time when you’re more likely to spend more than you earn or feel stressed because you aren’t sure where it all went.
Check in with yourself often, ideally at least once a week. And if the thought of budgeting is stressful as is, don’t overcomplicate it; use an app or a notebook at your desk and tie your budgeting practice to a habit you already do without thinking.
Swiping Credit Cards Recklessly
Plastic makes spending painless — at least while you’re doing it. But the consequences are dire. Suddenly, you’ll have piles of debt and a tanked credit score, and you end up paying much more than you borrowed.
Combat this by consciously buying within your means. We also recommend reading your statements and paying closer attention to how much you spend. If you’re someone who forgets to pay credit cards on time, set up automatic payments so you don’t get slammed with late fees.
Falling Victim to Lifestyle Inflation
That well-deserved raise is finally yours. Time to buy everything you’ve ever dreamed of, right? Wrong. These seemingly momentary splurge moments quickly get out of hand, and you’ll feel like you deserve a more expensive lifestyle just because you can afford it. But this puts you right back where you started: wishing you had more.
Funnel more money into a savings account before you have a chance to spend it. And when you get a raise or windfall, it’s okay to treat yourself to a few things as long as you feel like you have a good handle on expenses. Bonus points for creating new and visible savings goals that keep you motivated.
Spending a “Little Here and There”
What’s the harm in buying a coffee here or a snack there? Well, if you only did this once and a while, nothing. But for many people, that’s not their reality — that’s their rationale for overspending, and it’s eating away at their budgets without them even realizing it.
If this sounds like you, there’s only one solution: you have to track absolutely everything. Try this for a month without changing any of your habits; keep buying those “treat yourself” things as you normally would. At the end of the month, tally these expenses up. You’ll soon find out why you always feel like your bank account is running on fumes.
Ignoring an Emergency Fund
People have a hard time saving money, but they have an even harder time saving money “just in case.” It makes sense; it feels more important to focus on daily bills rather than worrying about “what if” scenarios. But that means one unexpected expense is enough to take you from treading water in your current circumstances to drowning in debt.
Make a new goal to save three to six months’ worth of living expenses. It sounds like a lot, but do as much as you can; something is better than nothing! Treat it like a non-negotiable bill, like rent or internet, so you don’t put it off.
