Managing personal finances is a constant struggle. Among tackling everyday expenses and managing credit card debt any one of us are bound to make money mistakes. Some of them are more common than the others.
Common Money Mistakes We Make
Ignoring bills once they’ve been automated.
Automating your bills is an efficient way to make sure that everything gets paid on time. However, you should still review your bills and statements every month. Check for unauthorized charges or any extra service fees. This way, you can eliminate money mistakes that can cost you more in the future.
Spending the money you don’t have yet.
This can easily happen with your tax return or a holiday bonus. You might splurge and tell yourself that your bonus money will replenish your bank account. However, once the bonus comes you might spend it without even realizing it. You should also be careful because you may think you’re getting more than you actually get, and then you are in an even worse situation.
Not realizing that small purchases add up to a big expense.
It may not seem like a big deal to spend $7 on lunch and $3 on coffee every day of the work week. But when you look at the big picture, you are spending $50 per week which adds up to $2,600 per year. All those little purchases add up. Instead of spending frivolously here and there you could use that money to make an extra mortgage payment. Consciously think about what you’re spending money on and budget for entertainment and dining out.
Paying only the minimum balance on your credit cards.
Paying the minimum every month will bring you into a cycle of credit card debt. It will increase the life of your debt, and you will end up paying much more in interest. Use this cost of credit calculator to find out how much extra you might pay on credit card purchases.
Relying on credit for emergencies.
Believing you don’t need an emergency fund because you have your credit card if an unexpected emergency occurred is a big mistake. When you use your credit card for emergencies instead of cash, you are paying 10-20% (or higher) in interest. Instead, sock money away in an emergency bank account and earn interest on it until an emergency occurs.
Spending more than you earn.
It’s a simple principle to understand, you need to spend less than you earn or earn more than you spend. Spending more than you earn means you are accumulating debt. Spending as much as you earn means you are living paycheck to paycheck. Neither is a good way to live. In order to be in a good financial situation and build wealth, you need to spend less than you earn. This may mean changing your lifestyle to spend less or getting another job to earn more.
Avoiding these common money mistakes can help you get on the right track with your finances. If you have trouble consolidating bills and are in search of a debt settlement service, contact the certified credit counselors at American Consumer Credit Counseling by calling 800-769-3571.