Common Money Blunders that Make it Difficult to Save
By April Lewis-Parks
Most people can admit to money or budgeting mistakes that they’ve made once or twice, but for others, certain habits may have developed into a repetitive cycle of bad behavior. A mistake here and there can create a bump in the road when trying to save money, pay down credit card debt or eliminate student loans. However, errors that are repeated frequently can slowly derail your finances and make it more challenging to get back on track.
There are several spending mistakes that fall into this category, and it’s important to avoid them to help strengthen your financial profile. For example, many people immediately spend the bulk of their paychecks as soon as they receive them without properly accounting for savings, unexpected costs such as birthday presents or holidays and bills. As a result of failing to spread out their income, they often fall short at the end of the pay cycle and are forced to scrimp to make ends meet. Developing a proper budget complete with payment due dates, strict savings guidelines and wiggle room for extra costs can help individuals avoid this dangerous cycle of spending.
Another common error involves steering clear of credit cards and loan products. While avoiding debt may initially seem like a smart idea, it can actually hurt people in several ways. It makes it nearly impossible to build credit and credit scores. Reports are used by lenders, employers, landlords and insurers to make determinations about consumers and how credit risky or worthy they are. Rather than avoiding credit altogether, learning to manage it wisely is better and beneficial. For example, keeping credit balances low and only charge amounts that you can pay off in full each billing cycle can help you build credit responsibly and avoid interest charges. Seeking favorable loan products that don’t impose unrealistic terms and excessive interest rates can also help ensure that you can make your monthly payments without straining your finances.
Knowing when to ask for help
Some people who find it challenging to dig themselves out of debt or improve their finances may also be guilty of another common mistake: failing to seek guidance. There is no shame in working with a credit counselor or financial advisor when times are tough and consumers are unsure how to break bad behaviors. Professionals can not only help consumers develop a solution that falls in line with their individual situation, but can also steer them toward resources to help them slowly change poor habits into good ones.