We all have some financial regrets. Maybe it was that last impulsive Amazon purchase or that late-night takeout you really didn’t need. These are normal money mistakes, but there are some bigger financial mistakes out there that you should avoid at all costs.
Not having emergency savings
Unexpected events and costs arise all the time. Sometimes it’s a minimal amount, but sometimes it’s much more. If you’ve never had an emergency cost come up, you’ve been relatively lucky. One of the biggest money mistakes anyone can make is not having an emergency fund. Without an emergency fund, you may have to turn to more expensive ways to resolve an emergency, such as a high-interest loan or credit card.
Setting up an emergency fund is simple. Open a separate savings account or invest in an ISA so that you can keep your emergency savings separate from your regular bank account. Start small by putting aside some money each month and before you know it you’ll have a comfortable reserve of money to fall back on.
Paying off the wrong debts
We all want to be debt-free. Paying off debts is a difficult process, but one money mistake you should avoid is paying off the “wrong” debt.
When paying off debts, you should prioritize high-interest debts. That means rather than paying extra towards your mortgage or low-interest loans, you should focus on high-interest debts like car payments, student loans, and credit cards.
We all deserve to treat ourselves to a restaurant meal with friends or a new piece of clothing. The mistake many of us make is constant frivolous spending rather than treating these treats as what they are – treats. For example, if you spend X amount a week on dining out and multiply that amount by 52 weeks of the year, then the total cost of this expensive habit may surprise you.
Unfortunately, avoiding frivolous spending may require some harsh lifestyle changes. You could go cold turkey and cut out unnecessary spending altogether. Or you could start small and start taking part in free activities, such as the ones on this list of free things to do with friends.
Not planning for retirement
Retirement may feel a long way away, but it’s something we should all be thinking about. But according to the National Institute of Retirement Security, 66% of working millennials have nothing saved for their retirement.
Paying into pension plans provided by your employer and setting up a separate, high-yield savings account that you can front-load with retirement savings is essential at any age. It also means you can plan for early retirement and prepare for the future, especially if ill-health stops you from working.
Not monitoring your outgoings
Having full knowledge of where your money is coming from and going to is essential if you want to effectively budget and save. Check your bank transactions regularly to ensure you don’t have subscriptions you’ve forgotten to cancel or bills that are higher than you realized.
Creating a spreadsheet to manage your budget every month is essential to your financial health and will help you monitor your finances and make adjustments where needed.