Many people put off financial responsibility as a task to be done tomorrow or when they are older, but in order to get the most out of your time and money, it is important to be responsible and make your money work for you as soon as possible.
It may sound difficult or daunting, especially if you have just been living paycheck to paycheck without a plan, but after a few weeks, financial responsibility becomes a habit. Sometimes, it can even be fun and like a game to see how much you can make your paycheck work for you and your household.
Budgeting is an important part of any household. You always want to be sure that you have more money coming in than going out. The easiest and most effective way to ensure this is by writing a budget for your specific household and needs.
Budgeting makes it easier to see and control where your earnings are going. It also makes it easier to cut unnecessary expenses along with helping you keep track of any possible excessive spending. Budgeting also makes it easier to make sure you have an emergency and save for other reasons. In 2017, 78 percent of Americans are living paycheck to paycheck, which means that a lot of people are really vulnerable.
Not Paying off Debt Monthly
Paying off your credit cards and other debt is important. If you let the credit card debt pile up or don’t pay on time, it will have a huge impact on your credit score.
On top of a suffering credit score, you’ll face a suffering wallet as a result of your growing monthly credit card bill. On the other hand, if you constantly pay off your credit cards on a monthly basis, it can be a huge help to your credit score. You also want to make sure you pay the monthly bills for any other debt you might owe.
There are tools available that help you calculate monthly debt and forecast how soon you are able to pay it off.
Not Investigating Investments/Not Understanding Investing
Another huge mistake that often causes long-term regret is not properly investigating the investments you are making. Many people have no idea where their money is even going or what it is supporting.
Your money will work for you much better if you understand the market and how to make your money work its hardest for you. If you struggle to understand investing, it is okay to get professional help.
Ignoring the Importance of an Emergency Fund
Many people live paycheck to paycheck, but just because this is normal, doesn’t mean it is the best way to live your life. If you don’t have an emergency fund and are living from paycheck to paycheck, the smallest surprise expense could financially ruin you.
This surprise expense could be a car expense or a medical expense. You could also be unexpectedly laid off or fired. To start saving an emergency fund, you should save a minimum of $1000. However, once you are financially secure, you should calculate your expenses and save enough money to cover three to six months of your living expenses.
Buying a New Car You Can’t Afford
Everyone fantasizes about driving that nice, new, shiny car off the lot, but most of the time, the new car’s massive devaluation is excluded from the fantasy. Buying a car you can’t afford can be a huge pain.
It is perfectly fine to buy a used car from a reliable dealer, just make sure if you don’t know much about cars, you bring someone along who does. Also, never rely on an employer’s driver allowance or anything similar, because if anything happens to your job, you are left without that income but still with your car’s bill.
Not Being Properly Insured
Sometimes, health insurance seems so expensive that it doesn’t feel worth it, but not being insured is far more expensive. No one plans on having an emergency or any health surprises, but it happens all the time.
Even if you are healthy and have never had an emergency or health problems, you never know when health problems might emerge. You could get in a car accident, get hurt playing a sport, or be injured at work. You can be as careful as you want, and still end up with a huge medical bill.
You really need to be insured in case of health emergencies or any type of accident. Hospital bills are incredibly expensive, which is a huge reason why medical debt is the leading cause of bankruptcy in America.
Don’t risk your whole financial future for immediate savings. It can only go badly.
Not Making Retirement a Priority
It is the best for your future and you will earn the most the earlier you start saving for retirement. You want to make that interest rate work its hardest for you, and you can gain more through compounding interest the sooner you invest the money.
Starting your retirement saving early is very important since someone who invested $3,000 yearly for 10 years starting at the age of 25 will have over $338,000 in retirement, compared to someone who waited until the age of 35 and saved $3,000 yearly for 30 years, who would save a total of about $303,000.
This is why you don’t want to wait to start saving for retirement. Not only that, but time passes much more quickly than you realize. You don’t want to let too much time pass or you will never be able to retire.
Not Discussing Money with Your Spouse
Partnership makes everything better. You always want to make sure that you have an honest relationship with your significant other, so why would you choose to not be open about money? It’s actually one of many the things you should talk about it.
For the most part, two heads are better than one, and you will probably do a better job making the best financial decisions for your home if all information is known and out in the open. Talk to each other and be partners when it comes to finances.
Not Noticing or Investigating Better Solutions to Recurring Expenses
Many people have recurring expenses for things that are either unnecessary or that they don’t use. Also, there are usually better and less expensive options. For instance, why would you pay for cable if you usually stream your entertainment online?
If you only have cable to watch sports, either find a local place that plays your team’s games or find a streaming service that offers the game. Many people also have the ability to minimize their phone bills, or, if you want to minimize daily expenses, you could just take time to buy a good coffee maker instead of overspending on your daily java intake.
Make These Tips Habits
The habits listed above can be detrimental to your financial life, but with some willpower they can be broken. Once you stop making these 10 mistakes, your stress will be minimized, and you will wish you were financially responsible sooner.
It is relatively simple and provides a lot of day-to-day relief from stress related to bills, groceries, and other everyday expenses, and once you get used to your new, responsible habits, financial responsibility will become second nature.