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People who struggle with money share similar money mistakes that can be avoided through intentional actions. It’s about clearly seeing where you are and where you want to go. Many of these money mistakes occur out of habit and often people don’t realize how significantly their day to day choices are affecting them financially. Most of us make plenty of money, but we spend too much on junk! Read below for 5 common money mistakes people make on a daily basis.
1. Most People Don’t See The Value Of A Budget
I know I’m pounding this into your head, but seriously – how do you manage your money effectively without a budget? You have a calendar to manage your time, you have a recap system at work to show how productive you are, why would you not manage your money in the same fashion? I promise you, budgets are not a bad thing and they actually free you up to do more of the fun things you love!
Rather than sitting at the end of the month wondering where all your money went and why you can’t afford that latest item you want, tell your money where to go! We are so calculated and strategic in the rest of our lives, it’s time to get serious about our money. For a refresher, refer to my budget article: It’s Time To Budget Like A Boss!
When you start to budget regularly, you will quickly see that a budget is extremely valuable and you will either end up with a bunch of extra money at the end of the month, or you will clearly see where you need to make some cuts.
2. Credit Card Debt Is Killing Them!
All in all, I think credit cards are more harmful than good. Yes, you can rack up reward points and airline miles, but by using a credit card, you are more than likely spending much more than if you used cash exclusively. I wrote about the pro’s and con’s to credit cards in When It PAYS To Use Credit Cards and it ultimately comes down to paying off your credit card each month.
If your credit cards are not paid off in full each and every month, you should not be using a credit card. The average credit card interest rate is over 16%! You are throwing money away at a rate of 16% each month you carry a balance. If your credit cards carry a balance, why would you ever swipe that card again until it is paid off?
We have to break out of our routines of paying for everything with a credit card if we can’t manage them appropriately.
I was recently talking to a friend of mine who had racked up $50,000 in credit card debt. How does that happen??? He didn’t buy a vehicle on his credit card – it came from small purchases over time and interest building up. Do yourself a favor, if you carry a credit card balance – stop all usage of the cards and carry cash until they are paid in full.
3. Saving And Investing Are Two Very Different Things
I know people who are great savers. They stockpile money like nobody’s business, but refuse to invest because they are afraid of the market. That money under their mattress is worth about 2%-3% less each year.
Here is a simple example. Say you saved up $20,000 and left it under your mattress for 20 years. After 20 years, how much would you have? Yep, $20,000 but it would have a lot less buying power 20 years from now. What if you invested $20,000 in an index fund for the next 20 years and received a realistic and reasonable return of 8% each year? In 20 years that $20K would have grown to $93,219.14. This is a night and day difference!
People can save until they are blue in the face and they will have an extremely difficult time saving enough to retire. Let’s say someone starts with $20,000 and saves an additional $10,000 for 20 years. After 20 years they would have $220,000. Had they invested that money, they could have easily more than doubled their money resulting in $587,448.36. While this may sound too good to be true, realize this is not a get rich quick scheme. This is constant investing for a 20 year period – the only real way you can assure yourself of a comfortable retirement in the future.
4. They Don’t Take Advantage Of Employer Benefits
Some companies offer great benefits that employees rarely know about or take full advantage of. Do you know all of the benefits your company offers? Have you gone through the entire booklet and weighed the pros and cons of the different benefits offered? I’ll give you a hint, if your employer offers a Health Savings Account, you should be using and maxing it out if at all possible.
Does your company offer a 401K match? If so, you should be taking the full match no matter what. If you don’t, you’re leaving a 100% return on your money on the table! Is a PPO or a HMO plan better? Look over your past health expenses and estimate future ones to take the most advantage of your plan. Don’t let your company make the choice for you.
Arrest Your Debt's Pro Tip:
Track your investments for free with Personal Capital. It's how I track my pension and retirement funds.
Look through all of your benefits to set yourself up for success. Recently my employer opted to start offering a Roth IRA in addition to the other retirement accounts. You can bet I will be taking full advantage of this!
5. Grocery Shopping When You’re Hungry
I couldn’t help but put this one in here. I don’t often feel regret in my life, but when I do – it’s usually after I go grocery shopping when I’m hungry! Tell me I’m not alone in this! I don’t care if you give me a list when I go to the store – if I’m not well fed, you can bet that I’m coming home with several unnecessary items that looked delicious when I was on my grocery mission.
This is where Click List comes into play (How Frys Pickup (formally Click List) Saves Me Money). I can usually go to the computer and order my groceries without the temptation of seeing the items in person or smelling them as I walk past the deli aisle. Do yourself a favor, use Click List or make a conscious decision to avoid grocery shopping when you’re hungry!
Thank you so much for taking the time to read my article. I enjoy writing for and learning with you so please do me a favor and subscribe below with your email so you don’t miss any of my future posts. I look forward to providing you with more great content! Keep it up my friends, you work too hard to be this broke!