I know, I know, when money’s tight you have to do some strange things to survive financially. But there’s a BIG difference between eating mac & cheese every night … and buying a new big screen hi-def TV to watch while you eat your mac & cheese!
So you owe it to yourself to correct as many of these mistakes as possible – as quickly as possible – in order to get yourself back on track:
1 - Playing by the creditors rules
Ever wonder why you are paying 19.99% interest on your credit cards? Because it’s a lot easier to pay than to call them up and ask for a break. And because it’s a lot easier than shopping around for a new credit card with a lower rate (if you do this, make sure to cut up the old card – you don’t need to cancel the old account, for credit score purposes, but you don’t want to add to your debt, just lower your interest).
2 - Not paying yourself first
These days setting up a savings account is very easy. Just go online, search for “online savings account”, find the highest interest rate, and set up an automatic withdrawal every month. Even if it’s just $25 or $50 a month, at least it’s a start. And before long you’ll have your own emergency fund (see below).
3 - No rainy day emergency fund
Without an emergency fund, it seems like every expense is an emergency – and then finds it way onto your credit card. You need to find a way to put aside 1-2 months worth of expenses into a bank account that you only use for emergencies (and getting that big screen hi-def TV is NOT an emergency!)
4 - Keep spending what you don’t have
Sure, when you need to spend more than you make just to buy groceries, life is tough. But then you need to look really deep (deep inside your heart AND deep inside your checkbook) for ways to cut your expenses. Do you really need cable TV more than you need food? Rather than driving to the mall, how about driving to the consignment store to shop for clothes? See, you get the idea - if you just try hard, you can find ways to save money.
5 - Having a credit card for every store you shop at
Yes, saving 10% on your first purchase sounds tempting. But don’t do it. Next thing you know you’ll have 12 credit cards – and 12 credit card payments. Stick to 1 or 2 major cards so you can manage your payments (and avoid using ALL of these cards!)
6 - Buying a fancy car every couple of years
In a perfect world we’d all drive a really nice car. But buying cars sucks money out of your pockets faster than just about any other purchase! So unless you’re a professional driver, buy a car that is cheap but reliable (get it inspected BEFORE you buy it to make sure), gets good mileage – and that you can keep long enough to avoid making big payments for the rest of your life!
7 - Fancy electronics
See “big screen hi-def TV” above.
8 - Helping others when you can’t help yourself
Sure, it feels good to help out relatives when life gets tough for them. They’re blood, and you need to help them. But will cousin Suzie REALLY be paying you back that $500 you lent her for that new furniture? That you could be using for your next credit card payment. Or the start of your new emergency fund. If not, then don’t do it. Because you’ll both end up paying for your mistake.
9 - Always waiting to start saving, but never doing it
If this sounds like you (then you’re not alone, but that’s no excuse!), then go directly to #10 below:
10 - Having no goals and no plan
When you go on vacation do you hop in your car and start driving with no map & no GPS? Bet you don’t. But if you do, where would you end up? Probably in the same place you’d end up financially if you live paycheck to paycheck – someplace you DON’T want to be! So, even if you don’t hire a financial planner to help you get started, you need to have some type of plan – to save for retirement, to save for your kid’s college, to save for a new car, to pay of a credit card bill. If you do nothing else, start by writing down all your financial goals, big and small, put them in order of priority, and start working on the first goal. Now, you’ll end least be headed in the right direction!
Know any other financial mistakes to add to this list? (comment below)