Money mistakes can really hurt our budget. However, unless you know that you are making mistakes in your finances, you can’t fix them. Today I’m going to share some common mistakes people make with their money.
I love the quote that says “when you know better, you do better.” When I look at our history with our finances, and the struggle we personally went through as a family, I see that for many years we just didn’t know what we were doing wrong.
When you don’t realize what you are doing wrong you don’t believe you have the power to fix it. You believe that it is out of your hands.
But once you realize that you are making mistakes (this can apply to not only your finances but to other areas of your life) then you begin to understand that you have the power to make different choices to change the outcome of your financial health.
For us when we began to realize we had more control over our finances than we initially believed, we started to make changes.
We stopped making the same mistakes we had been making for years when it came to money.
And, over time we began to see positive results. As each year passed those positive results snowballed into a place where it was easier to manage our money.
The truth is, I don’t think we should be insanely hard on ourselves for our past financial mistakes when we didn’t really know what we were doing wrong. Yes, I get wishing we had made better decisions with our money, but beating ourselves up for those past choices will get us nowhere.
The best thing we can do is focus on the present and the future and how we can change our lives from this point forward.
We should put our energy into doing what we can do to prevent ourselves from making the same mistakes.
It’s never too late to make positive changes to your finances. If you have been making any of the common money mistakes listed below, decide today that you are going to stop and you are going to change your ways to better your financial future.
5 COMMON MONEY MISTAKES YOU MAY BE MAKING AND HOW TO FIX THEM
NOT OPENING BILLS WHEN THEY COME.
Sometimes our finances get so out of control we don’t even want to look at our bills when they come in. The credit card bill comes and we know it’s going to be bad so we just don’t look at it. We think burying our head in the sand might just make it all go away.
Of course, deep down we know better. We know that it will spiral out of control if we continue to ignore it. The first step to dealing with our debt and our increasingly large bills that we are struggling to pay is to know what we are dealing with and being realistic about our out of control spending.
When you open your bills after ignoring them for awhile, prepare yourself. Remind yourself that whatever is in those bills can be changed with hard work and sacrifice.
HOW TO FIX: Take a deep breath, open your bills as soon as they come, and make a plan on how you will pay for them, which more than likely will include keeping track of them in your budget, which we will talk about in a minute.
CONSTANTLY INCREASING YOUR CREDIT LIMIT ON YOUR CREDIT CARDS
There is this common theme that happens when you own a credit card. The credit card company will call you or send you a letter saying that they want to increase your credit limit. Initially you think, “yes! More credit! It means I’m doing well with my finances if they want to give me more credit.”
However, this can be dangerous territory in my opinion. Having too much credit can be detrimental to your financial health if you are struggling to manage your money in the first place. It’s easy to say “well, it’s not like I’m going to USE that credit, it’s just nice to have just in case” but you would be surprised at how easy it is to rack of your debt load just because it’s there.
We’ve gotten the call to increase our credit limit on our credit cards many times and they person on the other end of the phone is always surprised to hear us decline. We don’t want to put ourselves in a position where we can get into trouble.
We also only own one credit card between the two of us, limiting our access to credit. Years ago we had 3 credit cards but we chose to get rid of two of those.
I’m not saying you should only have one credit card, but I do think it is wise to limit the amount of cards you do have.
HOW TO FIX: When credit card companies call, decline their offer to increase your debt to a very large amount. If you have a super large credit limit already, consider asking them to decrease it. Also consider getting rid of a credit card or two if you have many.
SHOPPING WITH A CREDIT CARD WITH THE IDEA THAT YOU WILL PAY IT OFF LATER BECAUSE YOU DON’T HAVE THE MONEY RIGHT NOW.
You are in the mall and you see a cute shirt you want. Except, you don’t have enough money for it right now. That’s okay though, because your credit card can get you the shirt until you can pay it off at the end of the month.
The problem with this kind of thinking is that, before you know it, it’s not just a shirt, but a whole wardrobe. Or going out to eat when you don’t have the money. Or buying a whole bookshelf of books.
Very few people will stop at that shirt. When we get into the mindset that we can “buy it now and pay it off later” we gradually start buying more and more until we discover we can’t even pay it off later anymore.
Now, I’m not necessarily talking about things like car loans or things like that. While it is awesome if you can purchase your vehicle outright and a great goal to have I realize it isn’t always possible for everyone. Of course, there are ways you can decrease your cost when it comes to things like car loans, but I’ll save that for another post.
But, when it comes to the day to day stuff, or even things like a nice piece of furniture you want but don’t necessarily need, it’s best to wait till you have the cash before buying it.
HOW TO FIX: When you see something you want, don’t impulse buy if you don’t have the cash (or even if you do – it’s always best to give yourself a waiting period to think about it.) Save up for those cute shoes or that chic new couch you want before you buy it. There’s nothing quite like the feeling of being able to hand over cash and enjoying your newly purchased item without the cloud of extra debt over your head.
NOT HAVING A BUDGET OR A FINANCIAL PLAN
If you aren’t keeping track of what’s coming in and what’s going out, it’s going to be easy to overspend. You need to write out a budget or financial plan.
Now, if the word “budget” makes you shudder, and you hate paperwork, you don’t have to worry. The truth is, when it comes to budget plans there are so many options out there these days. If you don’t like to write things down there are apps and computer programs that allow you to do all of it digitally. You can even connect some programs with your bank account! Check out my post on budgeting apps for more details on that.
However, if you are the type who likes to write things down and are looking for some templates to help you keep track of things like your budget, savings, and debt, be sure to check out the financial printables pack in my printables shop.
Of course, you can also sign up for my mailing list and access a simpler budget sheet for free as well. 🙂
HOW TO FIX: Find the perfect budget plan for you and your family and write down everything or plug everything into a computer or app.
NOT PUTTING MONEY AWAY FOR AN EMERGENCY
Sure, things may be going well right now, and you may not have had any major financial expenses for quite some time, but trust me when I say that won’t last forever.
A spouse can lose a job, you can get sick, your roof of your home can start leaking or your furnace can break, your car can die, and many other things can go wrong.
I don’t mean to sound all doom and gloom, but unfortunately a part of life is dealing with things like that.
If you are never prepared for these times you will constantly be taking three steps back whenever you try to make progress with your finances. That’s why you need an emergency fund.
If your finances are extremely tight you may feel like there is no way you can build an emergency fund. If that sounds like you, I encourage you to even put away 10-20 dollars each paycheck. Over time it will add up and even if an emergency happens before you’ve been able to build up a healthy savings fund, even having a little bit of money to contribute to the crisis can ease the burden a bit. Something is better than nothing.
HOW TO FIX: Start putting away at least a little bit of money from every paycheck into a savings account in case of emergency. If you have a larger income your goal should be to have at least $1000 put away. If you have a small income, make your goal $500.
OVERCOME THESE FINANCIAL MISTAKES
No matter your financial situation, it is not hopeless, even if it feels like that right now. Make a decision to move forward with improving your finances by no longer making the above money mistakes. Don’t beat yourself up over past mistakes. Put your head down and work hard to make those mistakes a thing of the past.
We write credit card purchases in our check book just as if we had written a check. When the bill comes all those charges have already been subtracted from the balance so there is no wondering where the money will come from. I go through the bill to be sure it is all in the checkbook register and then just write the check and send it off. Don’t subtract that amount though because you have already done it.
We made the mistake of keeping our savings in a passbook account at the bank for way too many years. We made lass than 25 cents interest each month on our balance. We transferred our savings to a money market account and also have about a third of it in 6 month CD accounts. Last month we earned a whopping $87 in interest and all it took was about an hour of setting up the new accounts.
Wow, that is some good interest! And yes, if you keep your credit card purchases tracked and pay them off every month it can definitely work. Good job on being so meticulous! I think many people aren’t that careful and that’s when trouble happens.