“If I knew then what I know now, I would do things differently.”
Does that phrase sound all too familiar? Do you have financial missteps that you wish you could do over?
Making questionable financial decisions is a part of life. That doesn’t mean however, that there aren’t some “warning signs” out there that could help you steer clear of some setbacks. Are you making any of these potential financial mistakes?
- Not paying off your entire credit card balance each month. Credit card debt has become the “American way” for many people. It’s just too easy to pull out the plastic and pay for something now, and worry about the consequences later. And unfortunately, there will always be consequences, especially when the debt becomes unmanageable. That’s why financial experts recommend paying off card debt each month, and setting a maximum spending limit on each card that will prevent excessive use. By paying off your credit card in full each month, you’ll avoid paying interest on your purchases, and if your credit card has a rewards program, you’ll still get to keep any points earned from your spending!
- Blindly investing. Putting your money in financial instruments you know little or nothing about could backfire on you down the road. Just like when you were in school, you need to do your homework if you want to get a “good grade” – that is, positive financial results. So do some research on the financial products you’re interested in, get second opinions, and meet with a financial adviser or investment planner to obtain a full understanding of how your investments will work for you.
- Not having an emergency fund. As sure as there are going to be rainy days, there will be times when life will rain down on you with unfortunate circumstances. A leaky roof, a major car repair, an unanticipated hospital bill. Not having funds to deal with those events could create a financial nightmare. That’s why experts suggest setting aside at least three months of your salary so you’re prepared to deal with unexpected costs.
- Failing to establish or follow a household budget. Having a reasonable spending plan in place can make it easier to manage your finances. It’s a matter of getting a firm grip of your income and expenses, and then working with those numbers to come up with a budget you can live with. The internet can be a great place to educate yourself about budgeting and help you find the tools and templates you need to make it as pain-free as possible.
- Not saving enough – or anything at all – for retirement. Setting money aside in a 401(k) or similar retirement fund is something that you should consider as a necessary expense. And although you don’t need to go overboard with how much you put into the fund on a regular basis, you don’t want to shortchange it, either. After all, these are the funds you will be tapping into during your “golden years” so you’ll need enough to live comfortably. And the sooner you start saving the better, since you’ll be earning compound interest that can really add up over the years.
- Paying too much for a new car. This is another one of those “doing your homework” situations. If you’re in the market for a new car, shop around before taking the plunge. The difference in prices could be significant from one dealer to the next. And don’t be inflexible when it comes to getting all the bells and whistles. If you’re willing to compromise on some features, that could help lower the cost, too. Keep in mind that it’s better to buy a new car toward the end of the month, when dealerships are focused on meeting their monthly quotas. One last thing – don’t settle for high interest rates. These days, it’s common to see zero or one percent interest on the life of a car loan.