Managing money is one of the hardest things to do. Do you spend the extra money from your paycheck or do you save it for the future? It’s hard to know what the right decision is when it comes to handling your finances and planning for your family’s future. When considering the management of your money, avoid making these common money mistakes.
Spending Every Penny/Not Having a Budget
Be smart about what you do with your paycheck. Just because you have money doesn’t mean that you have to spend it. It’s important to establish your own budget outlining your spending and saving habits either weekly, monthly or yearly. Most experts on money management recommend following the 50/30/20 rule. You should spend 50% of your income on necessities like food and rent, 30% should be used for discretionary spending and 20% should always be put into some form of savings.
Not Having an Emergency Fund
If you don’t already have an emergency fund established, you might want to start thinking about one. Emergency funds come in handy if unexpected expenses like a job loss or medical emergency occur. Think about putting away $50-$100 (or more if possible) away from every paycheck to start off your emergency fund. It’s best to have at least three to six months living expenses stored away in your emergency fund at all times.
Not saving for retirement
Waiting too long to put money away for retirement is one of the most common money mistakes made. Even if the amounts you’re putting away for retirement each are small, it will still make a difference in the end. If your company offers a match for their 401(k) program, you should take full advantage of it because it’s never too early to start saving for retirement.
Carrying a Balance or Running Up Credit Cards
Running up your credit card limit and carrying a balance on your cards is the one common money mistake that it the hardest to fix once made. If you’re constantly relying on your credit card but unable to make full payments on your balances it is a sign that you may want to re-evaluate your budget and spending habits. Keeping large balances on your credit card can severely affect your credit score in the long run. The best ways to use your credit cards are to make timely and on-time payments that pay off the full balance each month.
Luckily, we’re here to help to make sure you’re doing everything you can to plan for you and your family’s future.
Check out some helpful questions to ask yourself about how you manage your money.
- How do I spend my money every month?
Understand where your money goes and how much is necessary to spend or save.
- Do I have unnecessary expenses that I can get rid of?
If there’s something you’re paying for, like a gym membership you’re hardly using, get rid of it. It’s more money in your pocket at the end of the month.
- Do I have enough money saved for an emergency?
You never know what could happen so it’s best to always be prepared. Have at least $1,000 saved for an emergency at all times.
- How can I do more with my money?
Don’t keep all your eggs in one basket. Think about doing more with your money like investing into your 401(K), stocks, housing, etc.
- What big expenses do I have to make this year?
If you have large expense to pay like property taxes or mortgages, make sure that you plan ahead and save appropriately for such occasions.
While there is no perfect way to manage your finances, all of us at Lindow Insurance are here to help you plan for your family’s future and offer the resources to do so. If you ever have questions about how we can help you save money on your insurance policies, feel free to reach out to one of our helpful agents.