Achieving financial success is all about doing a few things right and avoiding detrimental errors.
The education curriculum doesn’t prioritize financial literacy, but it’s one of every adult’s most important life skills. Financial wellbeing is a comprehensive undertaking, and sound financial planning is at the core of the process. You should learn to budget and track your earned income – down to the last penny you earn. You can do it manually using paper and pen, on a spreadsheet, or by using financial apps like Simplifi by Quicken, which can make the process less tedious. Here are some money mistakes to steer clear of if you want to ensure financial success and bring prosperity to your economic life.
1. Failing to Save, or Not Prioritizing it (Automate savings and financial success)
The bedrock of any sound financial plan starts with savings.
Not saving is a perfect recipe for running into huge debts and financial catastrophe in case of emergencies. Plan out and have a vision for your savings since doing it blindly will feel like a burden, and sooner or later, you’ll lose willpower and empty your accounts for non-essentials.
The best way to plan is to limit your financial focus to what’s essential for you, your family, and other relationships. Don’t spend mindlessly nor spend on social status. F$@# keeping up with the Joneses! Seek out less expensive alternatives, comparison shop, and automate savings.
Once you have a plan, dedicate your savings to specific goals and nickname your accounts to help remind you of the larger goals. It is so easy to set up recurring automatic transfers to a savings account (or multiple transfers to multiple accounts) whenever you get paid. Be sure to shop around for banks that are right for you.
2. Not Tracking Your Expenses (Know where your money goes)
You might consider yourself disciplined and think you only spend on justified purchases, but recurring expenses or mindless spending can suck your account dry. Track your recurring and one-off expenses and monitor where your money goes. For example, you may have some subscriptions or streaming services that you signed up for years ago and no longer use. Canceling these unused/unnecessary services will keep money in your account, but be sure to save those found savings and not spend them on something else.
Also, you’ll realize that there are some expenses that you can replace with more affordable alternatives.
3. Not Budgeting (Create a Cashflow Plan)
Budgeting is intimidating. Instead, let’s develop a cashflow plan. Tell your money where to go before you have it.
Not planning how to spend your money now guarantees financial hardships in the future. Maximize your income, adapt your spending efficiently in each category, and prioritize savings/investing..
Having an emergency saving plan and/or contingency plan is crucial and should be first on the list of savings priorities.
4. Being Careless with Credit Cards, and not Clearing Debts on Time (Pay off in full monthly)
Many of us have been there…in consumer debt and willfully ignorant of the soul-crushing implications.
Failing to clear debts on time means additional interest paid, which compounds the problem to add more unnecessary burden to your paycheck. Similarly, debts often bring a strain on your financial abilities, cause stress, may strain your relationships, and reduce your ability to handle emergencies.
Refinancing your mortgage and car loans if you can afford to lower the interest is one way to lessen the ongoing debt burden. Also, create a payment plan that allows you to pay the debts higher than the minimum monthly payments. Use credit cards responsibly – they are easy to access but come with very high interests when not paid in full every month. Making only the minimum payment each month all but guarantees you will be in debt for a long time. As a rule of thumb, always live within your means. Never use credit cards to raise your lifestyle.
5. Spending More on Car and Housing (Plan and Spend Conservatively)
Overspending on big ticket items can torpedo your financial future.
Traditionally, experts recommend spending no more than one-third of your income on rent. However, owning a home often comes with additional costs and responsibilities that a renter does not have. When purchasing a house, consider the amount of space you need. Extra room or space translates into additional utility expenses, maintenance costs and may also increase homeowners insurance premiums.
The same applies when purchasing a new car. Shop around for the best rates and prices. Don’t forget the cost of maintaining the vehicle in addition to being able to comfortably afford the auto loan (if you finance the purchase).
Financial mistakes lead to costly problems in the future. As such, ensure that you develop a healthy relationship with money as early as possible. Don’t bury your head in the sand if you have made mistakes, rather face the financial mistakes you’ve made and retake charge of your money life.
Make financial success inevitable.