Common Money Mistakes
When you get right down to it, money management should just be basic math. So what makes it so hard to live within our means, or make better financial decisions? If you can relate to this or are a person who feels like you’re always treading water financially, even if you should be able to live comfortably, maybe you’re falling into one of these common traps.
You’re not tracking your spending.
This is one of the most likely mistakes because it’s one so many people make. It’s easy to assume that you know where your money is going—bills, food, occasional treating yourself. But to actually write down each purchase and transaction is to acknowledge it. You will start to see patterns of spending and from there have the ability to alter your behavior to be more money savvy.
Your budget isn’t reasonable for your lifestyle.
Don’t try to budget and then track spending. Instead, do the opposite. If you’re someone who loves to eat out, don’t budget only a little for that—go ahead and budget realistically. There may be things that are important to you that don’t seem reasonable to others. That’s okay. It’s not their budget. As long as you take care of necessities first and you live within your means, budget in a way that will actually suit your lifestyle.
You don’t have an emergency fund.
If you are living without an emergency fund, you run the risk of starting a race you cannot win when an emergency does strike. A lack of emergency fund means when disaster strikes, you will more than likely have to use credit to take care of it. That starts a loop of paying the credit back, which alters your existing budget, which may lead to charging more expenses. Avoid the depths of that problem with an emergency fund. Rule of thumb varies anywhere from $1,000 to six month’s pay—and don’t be afraid to build it slowly.
You don’t distinguish want and need.
Most people feel like they can easily tell the difference between needing something and wanting something. Where it can get confusing is when it comes to expenses like streaming or convenience services. In a society that revolves around being connected and two-day delivery, it can begin to seem like we should classify internet, television, or exclusive retailer accounts are all needs. Depending on your budget, though, they may not be. If you’re putting any of these on a credit card, they’re not something you can comfortably afford right now.
You spend every penny.
Just because you have the money doesn’t mean you need to spend it. When money hits our pockets and we pay for all of our necessities, sometimes we see money left over and our minds start flying with the evenings out, the treats, the extras we can get. Before you let loose, prioritize a savings or investment opportunity.
All good financial habits start with observation. Pay attention to where your money comes and goes, and start from there!
Kat’s Money Corner is posted in the Kansas City Star every week. Kat Hnatyshyn, when not blogging or caring for her little ones, is a manager with CommunityAmerica Credit Union. For more financial chatter, follow us on Twitter @CommunityAmerCU.