It’s not how much money you make, it’s what you do with it that matters.
People are constantly judging themselves by the amount of money they earn. What we need to realize is that it’s not so much how much money we make — but rather, what we DO with that money that makes a difference. There are a lot of mistakes involving the management of money that are commonly made. How many of these mistakes are we guilty of making?
Manage Your Money Well: Avoid These 5 Personal Financial Mistakes
1. Buying without looking for a better price.
When making any kind of purchase at all, buying the first thing that suits your needs is often a mistake. Chances are, with a little effort and research, you can find the same or similar item at a cheaper price and save money. If you shop around for a better price each time you have to make a purchase, you’ll save a lot of money over the course of your lifetime.
2. Impulse shopping.
Do you go shopping when you’re bored or depressed? People who shop on a whim end up buying things on impulse, and typically spend more money than they can afford. This is the cause of most personal debt problems. Whenever you enter a store, go in with a specific plan of attack. Before visiting a store, make a list of the things you intend to buy, and don’t purchase anything that isn’t on your list. Try these basic shopping tips to help control your buying impulses.
3. Failing to act now.
People often put things off for a later date, especially the more difficult things. Many twenty-something’s admit that they’re unable to save money because it’s tough and because they’re struggling enough as it is. Most have student loans and credit card debt to deal with, on top of the regular living expenses. The trouble with failing to save money because it’s too “hard” is that you’ll never find it easier to save, regardless of the amount of money you earn. You need to save money regularly, despite your circumstances. What you save should be based on the amount you make and the amount you owe — but even $5 or $10 a week adds up over time.
4. Keeping inadequate records.
It’s surprising how many people there are who don’t keep track of their money. They have no idea how much they earn on a monthly or annual basis, no idea what their living expenses are, or how much they pay out each month for utilities, gas, or entertainment. Without the use of money management system in place, you can never move forward and improve your financial position. Some people avoid knowing the numbers because they know that the bottom line isn’t favorable, but the more they try to avoid it, the worse their situation can become. If you plan and keep track of your finances, you’ll have a better handle on your debt and income. You’ll have a better chance of becoming financially free if you keep a closer eye on your finances. Try using financial budgeting software tools or personal financial software products to help you manage and track your money.
5. Letting your credit score drop.
Borrowing money — whether through traditional or peer to peer loans, credit cards or other sources — will help establish your credit history. Your credit history is viewable by employers, automobile insurance companies, and potential creditors. If you are late with repaying the money you owe, your credit score may suffer; consequently, you’ll start having trouble obtaining credit, you could be denied a job, and your car insurance rates may increase, among other things.
Whenever you buy things with credit, be sure to pay at least the minimum amount before the due date to prevent your credit score from getting hammered. Try not to use more credit than you can reasonably afford to pay off (in full) within the same month you make purchases.
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{ 5 comments… read them below or add one }
This is a great list – I can relate to every one. I think #3 is really important. With a topic like finances, it’s easy to feel overwhelmed and not know what to do, which just compounds the problem. Getting started earlier and doing what you can with what you have will get the ball rolling, which will make everything that comes after that much easier.
In terms of point 4, it’s not even keeping records, but knowing what you can and can’t spend and sticking to that.
point 3 is excellent because this applies to life in general and why some are more successful than others. Simply put, they make decisions right away and move on, hence why they get ahead.
On point #4, as tax time approaches, the lax record keeping throughout the year becomes more painful. Not only does this cause you to forget an eligible deduction, it also causes big headaches.
Good tips. You do have to be smart when you’re looking around for a better price though. I knew one guy who’d drive across town to get gas from one particular station that was always 10 cents cheaper than everyone else. I have no doubt he’d waste $5 (on driving there) to save $3 on a fill-up. Thanks to the internet, it’s pretty easy to price shop, and it often makes sense to order online too, if shipping is free or costs less than the gas to go pick it up yourself.
These are definitely common mistakes- I have made each one of them at some point! One that I think can be most detrimental is your credit score. I had no idea how important that was until I started looking for a house.