We’re not all natural economists. To be dollar-wise takes practice, know-how and most importantly, the right advice. To help you avoid the most prevalent pitfalls, we’ve gathered a selection of the most common mistakes that people make when managing their money to help put a few more dollars in your pocket both now and in the future.
Forgetting about the future
Forbes suggests that one of the biggest mistakes is not saving enough for retirement. They argue that you should be saving for retirement whenever you’re making money because there will be a time when you won’t be making any money – but you’ll still have to support yourself. This means that a little bit of every single dollar that you earn during your working life should go toward funding your retirement.
Not keeping records
On a more practical note, one common mistake easy to remedy is spending just a few minutes each day keeping track of your outgoings. Every financial whizz kid will tell you that budgeting is everything. And you don’t have to be Joe Hockey to know that you can’t budget without knowing what you’re spending. Keep track of things using a spreadsheet or an app on your phone or tablet.
Crunching the credit
Try and avoid buying day-to-day essentials on your credit card. Using cash or debit cards doesn’t just mean you’ll only spend what you can afford, but also adds cost in terms of interest to the price of the item. Sounds obvious, but you’d be surprised how soon those purchases add up. A Debt consolidation loan could also be used as a better way to manage your money.
Letting go of equity
Website Mybanktracker put this high on their list of no-nos, particularly for those in their forties. Most people plan for retirement assuming they’ll no longer have a mortgage payment to worry about. However, many people have turned to the equity in their homes to pay off debt, have relocated, or have watched their homes decline in value. If you don’t want to take mortgage debt with you when you retire, look at the figures now to find out if you’ll still be making payments into your 60s.
Living month to month
There are plenty of people who live from one payday to the next. We know because we’ve all done it…and only bitter experience can tell you it’s a cycle that’s hard to break out of. But it’s definitely worth making the effort as not only is it wearing on the nerves to think that any unexpected outlay will mean you’re short of cash for the rest of the month; it’s also a precarious way to manage your cash that’s fraught with risk.
So what’s the secret of not counting down the minutes until payday? The best way is to start saving a small amount each month. This is a win/win way of doing things as it will stop you spending every cent you earn each month, and also help you build up a nice little reserve that can be used in an emergency – or help get you a nice treat like a new car or holiday.
Not talking about goals
When it comes to cash, it’s good to share. If you’re living in a partnership, and according to the Australian Bureau of Statistics over 60% of Australian adults are, it’s crucial to talk about goals. One of the most counterproductive things you can do, financially speaking, is both work to achieve separate aims, whether it’s finally decorating the house, buying that shiny new ute or selling up and starting a llama farm.
Spend a little quality time together and discuss where you’d both like to be in the future. Define what each of you wants individually, then try and find areas where they overlap. Plan for five years, ten years and even twenty-five years, then formulate a plan for things that you both want and you both want to work towards.
Take head of these common mistakes, and by actively avoiding them you can get that illustrious step closer to being a successful money manager from now and into the future.
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