Handling money can be difficult, particularly if you learned poor financial lessons from your parents; when you model what you learned, you may make mistakes without even realizing it. Perhaps you learned from your parents, or your parents never talked to you about money, or you simply ignored the good advice your parents gave you. Whatever the reason you are having money problems, if you are making mistakes with money, it’s important to realize it.
If you frequently don’t have enough money, that should alert you to the fact that you are making mistakes with your money; this includes not being able to pay your bills, being unable to save any money, and forgetting how you spent your money. If you frequently lack sufficient funds, or you are simply not saving, it’s time to look at your financial choices.
Here are four common money mistakes that you may be making.
1. Spending too much money on your home
Whether you rent or you own, you shouldn’t be spending too much on your housing. Just how much is too much can be difficult to determine, but if you’re having trouble paying your bills because your home payment is so expensive, then you are probably spending too much. Many people agree that roughly 30% of your income can be spent on housing; however, that number isn’t right for everyone. To truly understand how much you can afford, you need to determine if you can pay for the rent or mortgage and still afford basic necessities; you also need to consider the fact that you may be paying for access to jobs in addition to just shelter. You will also need to consider how many other bills you have, and whether your debt payments are significant. If you have few additional bills and no debt, you might be able to afford a higher monthly payment.
If you rented an apartment based on a previous income, or you took out a mortgage and then you also accrued other debts, you may need to rethink whether you’re making the mistake of spending too much money on your home.
2. Perpetuating debt
Too much debt can be stifling. If you pay hundreds of dollars each month on your student loans, or you are drowning in credit card debt, you may be facing calls from creditors and your credit score may be suffering from missed payments. However, too much debt can cause several other problems. If you have too many debts, you may not have the necessary funds to pay other bills, and you also risk being unable to secure a loan in the future. If you can, it’s important to pay your debt down.
However, it’s equally important not to perpetuate the cycle. According to the Pew Research Center, eight in 10 Americans have debt. While some debt can help you build wealth early in your life, your financial insecurity can increase if you have too much debt as you age. If you are continually using your credit cards to purchase items, it’s time to start paying off your credit card debt.
3. Working alone
If you are married or in a commited relationship, you should be working with your partner to make smart financial decisions. It’s easy to get into a rythm of making your own decisions, paying your own bills, and working on your own financial goals; however, once you get married or move in with someone, you should be at least discussing your finances. It’s necessary to set goals together if you plan to live together in the future; otherwise you risk one person spending a lot more than the other, or you may face financial arguments in the future. There are also several money-saving strategies that could help improve your finances as a couple.
Even if you’re not in a relationship, it might be a good idea to get help from a financial advisor, or even a trusted friend who is good with money. Sometimes having someone else hold you accountable is a great way to get on track.
4. Neglecting the future
An emergency fund is an absolute necessity: If you don’t have money saved in case of an emergency, you need to make that a priority in your budget. You also should be regularly saving for big ticket items that you can’t pay out of pocket.
If your parents never saved for retirement, it likely isn’t high on your list of ways to use your money. You also could be in your 20s or 30s and you might think that you don’t need to start saving yet. However, it’s important to think about the future right now. There’s no way to know what Social Security will be like when you retire, and you need to save and invest in order to have the money you need to be comfortable in retirement. MSN has a helpful retirement calculator that can get you started. Your retirement should also come before your kids’ college tuition; it’s fantastic if you can help your kids go to college, but it’s more important that you don’t neglect your own future in the process.
Spending money is easy, but saving money can be difficult. If you’re making financial mistakes, or you’re not saving for the future, it’s never too late to start making smart money decisions.