However, these seemingly small mistakes can end up being quite costly. Here are six common money mistakes that you should avoid to help maintain your financial health.
Not Creating a Monthly Budget
Have you ever been pouring over receipts or bills at the end of the month and wondered, “Where did all the money go?” Don’t worry, you’re not alone. Most of us, at one point or another, have avoided creating a monthly budget, ultimately leading to losing control over our finances.
Creating a monthly budget allows you to plan out all your expenses and track the money you are spending on each category. Budgeting is also a great way to hold yourself accountable. You can pinpoint exactly what you’re overspending on and how to make lifestyle changes in order to stay within your limits.
Overusing Your Credit Card
Using your credit card for regular day-to-day expenses, such as groceries or gas, is becoming increasingly common. But high-interest rates on those charges mean you pay a much higher price for everyday things if you don’t pay off your balance in full.
To avoid making this mistake, treat your credit card like it’s your debit card and avoid spending money that you can’t pay back immediately.
Not Having an Emergency Fund
Only 39% of Americans have enough money to cover a $1000 unexpected bill, and almost a quarter of Americans would be willing to take out a loan or use their credit card in case of emergencies. However, taking out high-interest loans for emergencies could be a surefire way of ending up in debt.
Create an emergency fund that can cover at least three months of basic needs in case of a job loss or other emergency. Setting aside money for a rainy day can mean you always have a financial cushion when things get rough.
Saving Everything Instead of Investing
Savings are essential to managing your finances and building up your wealth. However, a common mistake is keeping too much money in cash. Even if you amass a large cash amount, inflation will indeed reduce the worth of your savings.
Investing your extra money can be a great way to save and grow your money. Investments such as stocks lead to greater returns but require a bit of risk-tolerance.
Buying What You Can’t Afford
It’s increasingly easy to live beyond our means and buy things we can’t afford on credit. Remember, if you can’t afford to buy it without credit, you can’t afford it.
Reducing the amount of money you spend on unnecessary, expensive things will ultimately give you greater control over your finances.
Not Creating Financial Goals
Not having financial goals is a common money mistake most people tend to make. Creating a budget and saving are both critical, but they tend to be ineffective when you don’t have a concrete goal to work toward.
Creating financial goals ultimately allows you to strive towards a specific monetary target by a particular date, pushing you to have greater control over each expense you make.
The Bottom Line
All of us tend to make mistakes when it comes to money. However, the sooner we realize our mistakes and avoid them, the sooner we can regain control over our finances. By avoiding these six mistakes, you can manage your money better and work towards a more secure financial future.
Josh is a financial expert with over 15 years of experience on Wall Street as a senior market strategist and trader. His career has spanned from working on the New York Stock Exchange floor to investment management and portfolio trading at Citibank, Chicago Trading Company, and Flow Traders.
Josh graduated from Cornell University with a degree from the Dyson School of Applied Economics & Management at the SC Johnson College of Business. He has held multiple professional licenses during his career, including FINRA Series 3, 7, 24, 55, Nasdaq OMX, Xetra & Eurex (German), and SIX (Swiss) trading licenses. Josh served as a senior trader and strategist, business partner, and head of futures in his former roles on Wall Street.
Josh's work and authoritative advice have appeared in major publications like Nasdaq, Forbes, The Sun, Yahoo! Finance, CBS News, Fortune, The Street, MSN Money, and Go Banking Rates. Josh currently holds areas of expertise in investing, wealth management, capital markets, taxes, real estate, cryptocurrencies, and personal finance.
Josh currently runs a wealth management business and investment firm. Additionally, he is the founder and CEO of Top Dollar, where he teaches others how to build 6-figure passive income with smart money strategies that he uses professionally.