Financial mistakes can be very costly, and the issue is more common than you might think. According to the Consumer Federation of America, 2 out of 3 Americans will admit to making really bad financial decisions. The figures for these financial mistakes are $5k in the majority of cases, evening out to an average of $23k. Those are certainly some costly financial errors. Want to know the most common and basic financial mistakes you should avoid? Read on …
1. No Reserves
So many of us rely on our credit cards in an emergency, and many more people are turning to very expensive payday loans. This is because we don’t have reserves to call on. It’s not nice thinking that you might have to dip into your rainy day fund, but if you need cash in an emergency, paying top dollar (in interest) for it, when your own savings are earning pitiful interest, is one of the most basic financial mistakes. Use your reserve funds when necessary and build them back up when you can. If you don’t have reserves then you are stuck – time to get savings girls! Even a little set aside each month will help.
2. Poor Budgeting
Poor budgeting also includes not budgeting at all. Both of these poor financial routes mean you end up making bad financial decisions. If you don’t have a budget, or have created a poor budget, how do you really know if you can afford something? How do you know how much you could afford to save? Do you know where your money goes? Or how much you spend on utilities? Having a budget puts you in control – no matter how much or how little you have. Not knowing these things makes it so much easier to make financial mistakes.
Banks and finance providers have become very cute in charging for their services in all manner of fees. There are two kinds of financial mistakes regarding fees. One is not shopping around to see if you can get the new service you need without a fee (after all they are getting paid via the interest they charge you, so why should they charge a fee?). The second is not being bothered to change to a different provider when a fee is introduced. Financial providers try to make it difficult to transfer accounts – they know we will think it is much easier to just accept a fee introduction. One of the traps is balance transfers on credit cards. Do your sums very, very carefully before accepting what looks like a great offer. Bankers don’t give money away for free.
Not the costliest of financial mistakes, but purchasing insurance is nothing more than bumping up the cost of a product. The warranty on most products should be adequate. If the extended warranty offered, when totalled for the period over which it is taken, exceeds the cost of the product – walk away. Think about it – If you buy a microwave for $50, and they want to charge you $15 a year for insurance – why is that a good deal? All you’ve really got is a microwave that costs $65.00. Save the $15 or spend it on something you do need.
5. Your Heart Rules Your Head
Yes, I know it is boring. There is nothing less boring and disheartening than standing in front of a shop window, and staring at a pair of Jimmy Choos that would be perfect to match that dress, when your brain clicks, and tells you that you cannot afford it. You are not alone in ignoring that voice that speaks of sound financial decisions. But to do so puts your financial health at risk. If you can’t afford them – find a cheaper alternative. Your head and sound common sense must rule when it comes to making decisions about spending money.
6. Not Checking
It’s frightening to think just how many people do not balance their check books or tick off their card statements. This also goes for checking any statements for regular expenses. You may sit there and say you have never been the victim of mis-charging or fraud, but if you don’t check your statements to finite detail, how can you say that for sure? This most basic of financial mistakes also includes checking your grocery receipts. When doing a large shopping trip, how do you know if you have been charged for 8 bananas instead of 6, or 3 loaves of bread instead of 1, unless you check? All these little things matter – especially when things are so expensive, or money is tight.
7. Not Asking for Help
Sticking your head in the sand is not going to solve your money problems. It is the absolute classic of financial mistakes to think that ignoring the problem will make it go away. Get help as early on in the process of recognizing you have money problems as soon as you can. You will not be alone –certainly not these days. And, don’t forget, there are places where you can go to get free financial advice – check this out: money.allwomenstalk.com
There is no need to burden yourself with bad financial decisions. You can turn your bad financial decisions into great lessons! Sound money management is a pretty easy thing to master, if you can be bothered. If you have a financial mistake that is hanging over your head, give budgeting a try! It’s worth the effort, don’t you think?