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Common Financial Mistakes and How to Avoid Them

For better or worse, money is a big part of most people’s lives and it’s easy to get caught up in financial mistakes that will hurt you in the long run if you’re not careful. But that doesn’t have to be your situation!

Here are 5 of the most common financial mistakes and how to avoid them.

Lack of a written budget: Create an actual budget based on real numbers that are a part of your real life. That means you need to consider costs like rent, utilities, student loans, car payments, food, and fun. Then think about your after tax income. How much do you actually bring home in your pay check? Do you have more than one source of income? Combine it all to come up with the best average monthly pay you can so you can measure what you earn against what you spend. You’ll also want to focus on goals you have, like buying a car or a house, and create a monthly budget that incorporates saving for them as much as possible. Create—and follow—a budget to help you avoid overspending and keep you on track to responsibly plan for the future.

Lack of a game plan to pay back student loans: Get educated on your student loan situation ASAP. If you ignore your student loans until bills start showing up, you’ll feel scattered and overwhelmed. If you fail to pay them, your credit will suffer and your wages can even be garnished.

Instead, take charge of your situation and contact your lenders right away. Find out exactly what you owe and what your repayment options are so you can plan accordingly. You may be able to make choices about repayment that will ease the burden too. For example, you may be able to consolidate loans to have fewer bills or opt to set up autopay so you never accidentally miss a payment.

You may qualify for a grace period from your lender that allows you to delay repayment until six months after graduation. If that is an option for you, take advantage of it. Use that time to create your plan for repayment, organize your finances and save money in an emergency fund for unexpected expenses.

Overspending and getting into bad spending habits: You might be proud of earning your shiny new degree or certificate and landing a new job (as you should be!), but don’t let these accomplishments cloud your judgment. You may have a better job and earn more money than you used to, but you still need to make sure your spending makes sense with what you earn.

Occasional splurging is OK, but if you do it all the time, it becomes a financially reckless way of life. Even something as small as those $5 lattes can add up if it’s a daily habit. Do you really want to spend more than $1800 a year on some coffee? Remember to keep your eye on your long- and short-term financial goals the next time you’re on the verge of making a small purchase you don’t need that could negatively impact your budget.

Lack of a rainy day fund or saving for a big goal: The unexpected will happen and the last thing you want is to be caught without the money to cover it. Without a savings, just one major expense — like a broken car or a boost in rent — can have long-lasting effects as you try to climb out of debt.

Start to save money now so that you can prepare for life’s unexpected obstacles. If it’s too hard to make yourself save, have part of your paycheck directly deposited into a savings account each week. That way, you’re less tempted to spend it because it’s money that hasn’t actually made it to your spending account.

You can use the same tactic to save for more expected and fun things too, like your family’s summer vacation or a new car. If you save a little every week or month, you can avoid feeling stressed when it comes time to pay up for that big exciting something.

Lack of retirement fund or poor planning for the future: When you’re fresh out of school, you’re usually thinking about the career ahead of you, not what comes after it. But many people live for 20 or 30 years after they quit working, so the sooner you start saving for retirement, the better.

The company where you work might have a retirement plan via a 401K or an IRA savings, and they might even match a portion of what you contribute. Talk to someone in your company’s human resources department to learn your options. If your employer doesn’t offer any form of retirement accounts, you can contact a financial planner who will guide you on how to start saving and what the best options are for your money.

 

If you’re ready for an education that will help you get into a career where you can focus on making smart money decisions for your future, contact Charter College today. You can learn how to get started in a career in Healthcare, Business, Information Technology and more.