Do you find that there is not too much money left after you have blown through your paycheck?
This isn’t uncommon.
It seems that no matter how much people plan to use their income wisely, they always seem to overspend.
These people are, quite often, making mistakes with their income and they do not even realize it!
On this page, we will look at the top money mistakes that people unknowingly make.
Purchasing Extended Warranties
If you are buying an extended warranty, you are doing things wrong.
Companies love to see this as free money because you probably are never going to claim to it.
According to Life Hack, if the product does not break in the first six months, it is unlikely it will break within 2 years (the normal length of an extended warranty).
Save your money here!
Not Budgeting
One of the main reasons as to why people run out of money each month is due to lack of budgeting.
If you budget, then you can work out exactly how much you have left to spend on the necessities.
Your budget, at the minimum, should include the following:
- Your income. List all income sources here.
- Utilities and other important bills e.g. telephone, credit cards, etc.
- How much you plan to spend on food
- Entertainment
By budgeting, you can see how much money you have to play around with each month.
You can make various adjustments to ensure that you stay within your budget.
Many people out there have completely turned their lives around by budgeting correctly.
An excellent guide to preparing budgets can be found on Wiki How.
Ignoring your IRA
It is important that you plan for retirement as soon as possible.
After all, you are going to need cash long after you have finished working
However, many people do not do this.
They do not think about their IRA at all.
Well, at least not until it is coming to the end of their working life.
Take a look at this chart:
Now, it is unlikely that you can invest $25,000 right at the start.
However, it shows that investing in your IRA will drastically increase the amount of cash you have available for your retirement.
Imagine having almost $500,000 to retire on just because you made the right financial decisions when you were younger!
You aren’t saving money each month
This, sort of, ties into the previous point about putting money into your IRA.
However, you can also think about the short term.
For example, if your car breaks down.
You probably will not have enough to pay for the repair out of your paycheck, but you will almost certainly have enough in your savings account.
You upgrade your electronics too often
A new iPhone is released, on average, every six months.
You will be surprised at how many people out there will run out and buy it, even if they have an absolutely good phone already.
This isn’t just about the iPhone either.
Plenty of electronics get regular upgrades.
If you are upgrading more than once a year (or in some cases, every two years), then you will be throwing away cash for what is, essentially, a minor upgrade on the technology that you have right now.
You could save hundreds of dollars each year just by being a bit more sensible with what you purchase.
You overpay your taxes
According to Marketplace, the IRS actively encourages people to overpay their taxes.
This is fine.
You are going to get your money back in the form of a tax refund.
However, why overpay your taxes to begin with?
You may as well just pay what you owe.
The average tax refund is almost $3,000, and this climbs each year.
Can you really afford to be without $3,000 for a year? Most people can’t!
You buy too much food
Look at this chart:
Each year, billions of dollars of food in the United States is just thrown out.
This is perfectly edible food.
Most of this waste is caused by people buying more food than they can eat.
In an ideal world, you will plan the food that you are going to eat on a weekly basis.
Stick to this plan too.
You will realize that you will throw away little food, saving you a decent amount of cash each week!
You ignore ‘hidden fees’ on products you have
There are plenty of hidden fees out there which you may not be aware of, mainly because you did not put effort into reading the terms and conditions of a product.
Fees that most people seem not to think about include:
- Using ATMs which are not in your bank’s network incurs fees.
- Cash advances on credit cards
- Overdraft fees due to poor budgeting.
- Late fees when you pay a bill late, even if it is just by a day.
You buy things that you really do not need
So many people out there do this.
You should not be spending cash on something that you really do not need at that moment in time.
If you can’t make the choice between two products, then you probably do not need either right there and then.
Also, if you are looking to see a new movie, try not to be one of the first through the door.
You will be surprised at how much extra it will cost to see a movie during the opening weeks.
If you can wait a short while, and yes this will require patience, you will be able to save a huge amount of cash.
You join various shopping clubs
Companies love free money.
Many companies out there, Sam’s Club and Costco being the big ones here, rely on people paying for a membership to shop there.
Again, this means that you are going to be throwing away cash.
Not looking for ways to lower your insurance costs
Insurance can be incredibly expensive.
In fact, it may be a rather sizable chunk of your income each month.
You, therefore, have a responsibility to ensure that you try to keep these costs as low as possible.
The following can help you out:
- If you have car insurance, you may wish to take a defensive driving class. This can drastically reduce your insurance costs for up to five years.
- If you have medical insurance, regularly undergo health check-ups.
- For your property insurance, you do not need to ensure every item in your home. Just ensure that the most valuable have insurance in place.
Not checking the beneficiaries on your insurance policies or bank accounts
This probably is not something that you are going to need to do all that often, but it is worth checking the beneficiaries listed on your life insurance policy from time to time.
This way you can be sure that the right person will receive a payout if you pass away suddenly.
It also ensures that your family has access to the money that they need to help them deal with the situation.
It is not something that will directly impact you, but it will impact your family, hence why it is so important.
Not talking to your children about managing their money
It is important that you teach your children about proper money management at an early age.
Schools do not tend to teach this stuff, so it is your responsibility to teach your child how to be responsible.
Teach them about the responsible use of credit.
Not managing your credit score correctly
Your credit score will have a tremendous impact on the credit you are entitled to, as well as the interest rates you will be charged on this credit.
It is, therefore, wise to check your credit score once a year.
If there are any issues, make sure you get them corrected.
Under federal law, everybody is entitled to one free credit report a year.
The following elements help to make up your credit score.
It is wise to bear this information in mind, particularly when it comes to payment history.
If you are constantly missing payments, then your finances will feel it for years to come due to higher interest rates on credit.
Paying off the minimum amount on your credit card each month
Always try to pay more than the minimum due on your credit cards each month.
If you pay more than the minimum, you will clear up your debt quicker.
This means you will be paying less interest back.
The savings can be substantial when you have credit into the thousands of dollars.
Be smart. Save Money. And lead a happy and contented life!
