We’ve all been guilty of a financial faux pas (—or a dozen). According to a survey from USA Today, over 73% of Americans live with financial regret. However, there’s beauty in that each financial blunder we make allows us to learn from our mistakes and move towards a bright financial future. Keep reading to learn some of the most common financial mistakes people make and how you can learn to avoid them.
Not Having Savings Set Aside for an Emergency
Would you have the funds to get it repaired and back on the road if your car broke down? What if you were laid-off from your job without any severance? A typical financial mistake is to hold the mentality that emergencies won’t happen to you. Thus, it would be unnecessary to set aside an emergency savings fund if a problem arose. As many of us don’t account for potential emergencies, when they do occur, we turn to credit cards and loans, sending us thousands of dollars in debt (or, in some cases, more debt). A general rule of thumb set by financial advisors is to set aside at least 3-6 months’ worth of funds to support your current lifestyle— assuming you would be bringing in no income or be largely set back due to an emergency.
Not Budgeting Your Lifestyle
We’ve all experienced going over budget at one point in our lives. Of course, there’s no shame in treating yourself to the finer things in life every so often. However, without an established budget to keep track of these kinds of purchases, you can find yourself caught in a spending pattern well beyond your monetary means. For example, your morning artisan coffees, expensive gym membership, and bi-weekly Amazon haul can quickly pile on the debt and burn holes in your pocket. Establishing a monthly budget that outlines what you can afford to splurge on allows you to enjoy everyday luxuries while keeping you on track to reach long-term financial goals.
Waiting to Save for Retirement
One of the most common financial mistakes someone can make is putting retirement planning on the back burner. In your 20’s and 30’s, retirement seems far too distant to prepare for. However, the fact of the matter is that it’s never too early to start saving. Getting a head start on contributing to a 401(k) plan and establishing long-term financial goals towards this milestone can save you the future headache of nearing the end of your career with only a year or two’s worth of salary saved.
Buying More Than You Need
We live in a material world where it’s difficult to resist the temptation of the designer bag or sports car we saw on our phones. Though in some cases, luxuries like these are worth the investment, they can often take away from funds we need for everyday necessities and life experiences. However, reassessing the need for material items doesn’t have to mean trading in your car or even downsizing your prized sneaker collection. Simply being mindful of your purchases, such as asking yourself if a product truly serves your long-term happiness or goals, can make all the difference for your financial future and prospects.