Whether you are trying to raise a growing family or are an entrepreneur who has recently opened a new startup, reaching your savings goals can be a serious challenge. Changes in the economy, pay cuts, and the rising cost of feeding a family can all put a serious strain on your budget and prevent savings growth. However, you might also be making some common financial errors that may be preventing you from accomplishing your financial goals; fortunately, you can correct these today and find a more effective path to building your savings.
1. Wasteful Spending
This mistake may sound obvious, but you may not realize how costly frivolous spending can be. Impromptu dinners out, ordering food in, and impulsive spending on that latest must-have gadget adds up quickly. In fact, spending anywhere from $25-$30 weekly on non-essential items can total over $1,000 a year. Imagine the annual savings you could rack up by putting this money in the bank instead.
You can gauge how much money you spend on extras by keeping an itemized list on hand instead of a casual budget. There are many different free phone apps you can use for this purpose, or you can track them on a large desk calendar or bullet journal if you enjoy creative planning. When you see your spending habits on paper, it becomes less of an abstract concept, and you may be inspired to cut back and set new savings goals for yourself.
2. Overusing Credit Cards
Credit cards can be a convenient resource when you are short on cash or for when your business account is lacking funds. However, overusing cards and living on borrowed money can come back to haunt you later on. This can be especially true with cards that have a low introductory APR but then rise to unmanageable heights when the introductory period expires. Once this happens and you have several different cards, you might find yourself in over your head.
You can save money on your credit card payments by switching to a company that offers cashback rewards instead of vacation or grocery points. Some even offer cards that are designed especially for small business owners so they can put their cashback bonus toward their next payment. This can lower your overall debt and allow you to filter the extra cash into your savings.
3. Borrowing on Owned Property
Whether you own a home or a commercial property, the available value can be tempting when it comes to borrowing against them, especially during times when money is tight or you have temporary cash flow problems. However, this is a short-term solution that can create even more debt and lower the value of the property. The more you borrow on a property’s value, the less financial control you have over it.
There are several ways you can avoid money shortages and borrowing on your home or commercial building. Use low-interest credit cards, turn to crowdfunding options for your small business, or turn to trusted family members or friends for loans. While you will still have to pay back the money for the latter solution, you can still regain control of your most valuable equity.
4. Failing to Budget
Expenses, like much of life, can be unpredictable. However, this does not mean having a solid budget in place is useless. In fact, budgeting can help you discover hidden cash within your current spending habits and help you trim away unnecessary spending, especially when it comes to reoccurring monthly payments for expenses connected to your vehicle or home.
For example, if you revise your budget today and discover that your car insurance payment has increased despite your clean driving record, you can call your agent and ask questions about whether you qualify for any discounts or search for a company that offers you lower premiums and free perks. Being proactive with where your money goes may prevent waste and help you build your savings.
5. Impulse Shopping
If you find yourself grabbing items at the grocery or office supply store checkout line, you might be an impulse shopper. You are also likely attracted by sales, discounts, and online coupons. While these can occasionally save you money, the way you spend could affect their overall value.
If you plan to shop an advertised sale and you are aware of your impulsive shopping habits, bring a friend or coworker along who can help you identify them. Take advantage of coupons and discounts, but only if they do not require you to spend a certain amount before you can use them. Avoid browsing when you visit a store for an advertised item, as you might be tempted to spend well beyond your budget and negate the savings of a sale price.
6. Making Minimum Credit Card Payments
Credit cards can be handy when they are used properly. However, overspending can cause minimum monthly payments to rise and this, coupled with high interest rates, may cause you to struggle to keep up. Soon, you may find yourself making minimum payments on each card and getting caught in a vicious cycle as your total balance never shrinks. You can end this cycle by consolidating all of your high-interest credit cards, whether you live in Norway and use Axo Finans or are a U.S. resident and work with a local consolidation company.
Consolidating your credit card debt, along with other loans, can help you lower or erase the total amount you owe. When you work with these companies, they combine your payments and may even be able to lower the interest on what you currently owe for each. This can be especially helpful if you took out cards with extremely high interest rates, such as those that can only be used at one particular retail location.
7. Failing to Plan for Large Purchases
Consolidation companies, such as those in Sweden, can help you refinance multiple credit cards and give you a leg up out of debt. However, if you continue to make financial mistakes, you might find yourself back where you started. One way to create new debt is failing to plan for large purchases, such as a car or a home. While these items can carry significant value, underestimating their cost or buying one that does not suit your budget or lifestyle can result in serious financial trouble.
If there is a major purchase in your future, planning as many details as possible can help you avoid money errors that may affect your budget later. For example, if you plan to buy a new car, use online value sites to compare different models so you can find the best deal possible in your area. If you are buying a home, work with a realtor and remember to consider upkeep and renovation costs before you make a final decision.
8. Putting Off Savings Plans
How many times have you meant to open a savings account and then spent your initial deposit on something else instead? Even if the money went to an unexpected expense, putting off opening a savings account can have a serious impact on your financial future. Even if you can only afford to deposit a limited amount during certain months, a small investment is better than none at all, especially if you need to turn to your savings in a time of need.
Talking with an agent at your local financial institution can inspire you to open a savings account. Some banks have plans that gain interest, while others are restrictive and do not allow you to draw on them until a certain date. Accounts of this type can be useful if you spend impulsively, as they could help you curb this habit. Most savings accounts require a small opening deposit and can teach you positive savings habits for the future.
Saving money and avoiding financial errors can be difficult, especially when your budget is already stretched thin. However, with a bit of effort and understanding, you can change some of your spending habits today and learn to save more effectively, no matter your financial situation.
