Creating and sticking to a budget is the best way to set yourself up for financial success (and using BudgetSimple is a great way to get started). Sometimes financial decisions seem like a good idea in the here-and-now, but could impact you in a negative way later on. Avoid these 5 common mistakes people tend to make concerning their money and steer clear of future financial woes.
1. Not building an emergency savings fund
Some people put off saving money or save too little, whether it’s because you’re focused on paying down debts or because you feel you have more important expenses to take care of first. Having a little cash stored away can help when something unexpected comes up – whether it’s dinner with an old friend or a flat tire, but what about for larger setbacks, such as the loss of a job? You could find yourself relying on credit cards, putting yourself in a real financial pickle. Sometimes it’s best to think worst-case scenario to make sure you’re as prepared as can be. Even saving just a little bit every month will build up over time.
2. Living beyond your means
I’ve been guilty of this from time to time, and it’s a bad habit that I’m in the process of breaking for good. It’s so easy to use a credit card in a pinch when a friend invites you out for an impromptu happy hour or when window shopping turns into something more. Sometimes it’s hard to say no, but if you can’t afford it, you should learn to do just that for your own financial benefit. Doing this repeatedly will only build up your debt. Accounting for things like this in your budget can help you avoid this problem.
3. Not contributing to your retirement fund
This one kind of seems self-explanatory. If you don’t contribute to your retirement fund now, you won’t have much to work with when that time actually comes. Take advantage of employer-matched contributions so you’re well-prepared to leave the workforce in the future.
4. Co-signing a loan or lending money
Co-signing on a loan for a family member or friend can help them get the credit line they’re looking for and won’t affect you if they can afford to make their payments on time. However, you’re responsible for those loan payments if they default, and this will hurt your own credit in the end. Be sure you trust the person you’re co-signing for before agreeing to this commitment. Similarly, you should also think twice before lending money to a friend or family member (I’m talking large sums of money – anywhere from hundreds to thousands of dollars). While you may have good intentions, consider the fact that you may not get that money back, or that it might be returned to you over a long period of time. Borrowing money from those closest to you can sometimes result in bad blood or hurt feelings on the side of either party, resulting in emotional, not just financial, problems.
5. Ignoring your partner’s financial habits
It’s not superficial to be concerned with a potential partner’s money behavior. If you’re planning to move in together or get married, you’ll end up sharing a large number of financial responsibilities. If you’re with someone that tends to spend money frivolously or ignore monthly bills (or even if they just make less than you do), be aware of the fact that you might be picking up the tab on multiple occasions. Is it something that’s financially feasible for you? Keep your lines of communication open with your partner and bring all money issues to the table to avoid financial turmoil and marital strain.
