1. Not Monitoring Your Credit
Your credit score has a huge impact on your finances. For starters, your credit will obviously affect how much interest you pay on a loan. a few percentage points on a car loan can mean thousands of dollars in additional interest. That is money that is simply wasted.
Your credit report also affects some things that you might not be aware of. One of those things in auto insurance. The lower your score, the more you will pay each month. In addition, your future employers might check your credit and if you have bad credit, that could cost you a job.
There is simply no reason not to monitor your credit these days. Almost all credit card companies offer free monitoring and there are other free services like Credit Karma or Credit Sesame.
2. Living In A Home That Is Too Expensive
Whether you are renting or have a mortgage, taking on too much home is an all too common problem. It is easy to do. The allure of that big house or long list of amenities can be too hard to resist.
Whether you rent or have a home loan, you should spend no more than 30 percent of your gross income on housing. This includes not only your rent or mortgage, but also the expenses related to your home. This includes utilities, HOA fees and maintenance.
So, let’s say that you rent and make 5000 dollars a month. That gives you 1500 dollars a month for housing minus about 200 dollars for utilities. That means that in this case, your monthly payments for rent should be 1300 dollars.
3. Dining Out Too Often
You have to treat yourself from time to time but if you have no real savings or retirement and you are dining our more than once a week, there is a problem.
A family of four at a modest restaurant can easily spend 60 to 80 dollars on a meal. Even going the fast food route can add up with receipts of up to 30 dollars.
Compare that to the healthy meal that you could have eaten at home for 10 dollars or less. It is important to live a little but if your savings are not in check, keep it within reason.
4. Not Having Emergency Savings
Things happen and when they do, you need to have the money to cover the expense. Not having an emergency savings account to handle these situations is a big mistake and one that a lot of people make. This is one of the reason that the payday loan industry thrives.
You should ideally have enough money in your savings to cover 6 months of expenses. Sounds daunting but you can do it, little by little. If you get paid every two weeks and can save 100 dollars a check, that is 2600 dollars a year. Start socking away 200 dollars each check and that is 5200 dollars in a year and that is before interest. The point is, save as much as you can and keep doing it and you will get there.
5. Charging Up Your Credit Cards
Credit card debt is rampant in the United States and with interest rates averaging over 17 percent, it represents a lot of money being wasted.
If you reach for your credit card before your debit card, you are making a huge mistake. Take a look at your next set of statements and add everything up. If you have 200 dollars a month in credit card payments, how much of that is going to interest. Most of it and that is money that is being wasted and that you could be using to build your savings and your retirement.
Put the cards away and start making more than just the minimum payment. It will take some time to get rid of the debt but keep at it and you will get there.
6. Relocating Without Thought
A promotion or job offer can often come with a change of location. Many people fail to look at the cost of living in a city before they take a job. It has a huge impact on how far that salary goes and how much you will have to spend just to cover your basic expenses.
When you get a job offer or are deciding on a place to settle, be sure to look at the cost of living in the city. A little time spent in research will pay huge dividends. Nerd Wallet has a great cost of living calculator tool. Use it and see how your salary would stack up in another city.
7. Not Accounting For Small Expenses
A few dollars here and a few dollars there can really add up. There is a real cost to every expense and you can see it if you work out the annual cost.
Take that 4 dollar cup of coffee that you have to have each week day morning. That works out to just over 1000 dollars a year. Pay a $2 toll each way to work to save a few minutes of driving, that is another 1000 dollars in a year. Even just value sizing your fast food meal can be 300 dollars in a year.
All of these things seem pretty trivial in the short term but really add up in the end. Saving a little here and a little there can easily add up to a few thousand dollars a year that you can throw into savings. That is over 20000 dollars in ten years or 60000 dollars in 30 years and that is before interest. After interest, you would be looking at well over 100,000 dollars at just a modest return. that can make a huge impact on a retirement fund.
8. Buying Too Much Car
This is one that is way too easy to fall for. Those new cars are just so shiny and dealers are very capable of getting you financed into just about anything that your heart desires.
Before financing that Mercedes, think about how much you would save by sticking with a Toyota. Several hundred dollars a month wasted on a car payment could be hundreds of thousands of dollars in a few decades when it is time to retire.
Another mistake people make with a car is affording more car by stretching out the payments. 7 year terms are even becoming common these days. What happens is that after 3 years you find that you need or want a new car and end up financing negative equity. This process keeps on repeating and eventually you are paying a Lexus size payment on a Kia. Keep loan terms to no more than 5 years.