When it comes to managing money, everyone has different ways they believe to be the best way to manage their money. But when it comes to money, there are things you can do to avoid causing yourself strife in the future.
Here are 11 mistakes you could be making with your money:
1. Taking on debt then not tracking it
When you’re young, it is easy to take on a line of debt and not really thing twice of about taking it on. In 2013 on average, 70% of college students graduated from their undergrad with $30,000 of student loan debt. Even more shocking is the fact is that large amount of those students were completely unaware of said debt. When considering getting an education, make sure to be aware of the debt you are taking on before signing on the dotted line.
2. A budget? What is that?
Often when it comes to money management, people are blissfully unaware of where their money is going every month. To avoid losing track of money, the best option is to build a budget and keep a budget. This will help you to know where every penny is going and be able to effectively plan for future money.
3. Spending too much
If you find yourself quickly running out of money or spending money that you just do not have available, you are making some money mistakes. Take a step back and look at your spending habits – if you are buying things you do not need but just happened to want you have a bad habit that you need to break. The best and quickest way to break this habit would be to build a budget and stick to it (see number 2).
4. Price versus Quality
It may be very tempting to guy cheaper items in exchange for quality, but chances are you will actually cost yourself more money in the long run by having to re-buy items over and over. Learn to invest in things with a higher quality. This does not just mean big things like cars or houses, but it could apply to littler things like shoes and clothing.
5. Saving for retirement sooner than later
The last thing someone in their twenties is going to think about is planning for retirement that won’t be available for another forty years, but this is a mistake. If your company offers you the ability to have a 401k, take full advantage of it. This will help you to start saving for your retirement and prevent yourself from scrambling or missing out completely in the future.
Just like a 401k, it is also a good idea to get a head start on investing. This is one of the most effective ways to start building wealth and “getting rich”. One option you can explore for investing is researching low-index funds. They are easy to set up and a good way to build some weather in your future.
7. No credit = problems
There are several companies that advertise “no credit, no problem” but the truth is having bad or no credit can be harmful in your future. Companies look at your credit score as a way to engage how trustworthy you are to give a loan to at a fair interest rate. In general, a “good” credit score is anything over 650, so you should strive to have your credit sit at 650 or above. Not sure how to build credit? Get yourself a credit card and build smart spending habits. Make it a point to never carry a balance on your card as this can affect your credit.
8. Emergency fund
One of the biggest mistakes people make is to not have an emergency fund. An emergency fund is important as it can help you when something comes up that you were just not prepared for. Often people assume that nothing will happen to their car, they won’t have a medical emergency or their house will not have any issues so they do not need to have money readily available, but this assumption could be devastating. Take time to determine an amount that you feel would be sufficient should you have an emergency. This amount will vary from person-to-person as each person has different monthly expenses.
9. No health insurance
One of the biggest mistakes people make when it comes to money is not having health insurance. It may seem impossible that you could ever have an issue with your health and that it is just a waste of money to have health insurance, but if you had a medical emergency, you could find yourself surrounded with thousands of medical bills. If your work does not provide you with insurance, take some time to research your options through healthcare.gov. This is a good place to start.
10. No long-term disability insurance
This also goes along with health insurance, but long-term disability insurance is always a good investment. Often people skip over this insurance because they do not believe they will ever be in the position to need it, but this assumption is also wrong. You could find yourself in a situation where you cannot work and you have run out of short-term disability. There is nothing worse than not having the ability to work and watching yourself go broke.
11. Assuming there will be more money in the future
Another common misconception is the fact that once you hit your 40s, you will be making significantly more money then you are now. Never assume that you will be making more money later because you might actually not be making more. The general idea is to live below your means. Your first priority should be to save for the future, then spend whatever you have leftover.