Some money mistakes are obvious. For example, you know you shouldn’t go on a shopping spree when you have bills to pay. That doesn’t mean every money mistake is obvious. Chances are, there are mistakes you’re making right now that are having a huge impact on your finances!
Not Having the Right Insurance
You probably understand the importance of having health insurance. With annual appointments and regular medications, it’s likely to impact you on a regular basis if you don’t have it, but don’t think health insurance is the only insurance you need to carry.
A few different types of insurance you should have include:
- Car insurance
- Homeowner’s or renter’s insurance
- Life insurance
- Identity theft protection
- Long-term disability insurance
In addition to looking into the different types of insurance, you also have to make sure you get the right type of each kind of insurance. For example, regular car insurance may not be enough. If you have had your license revoked, you will have to get SR22 insurance, or you could face a hefty fine. If you don’t have flood insurance and you experience a flood, you could lose everything you own.
Using Your Credit Card a Little Too Much
You can’t get away from credit. You will likely need it to buy a house and a car, and building your credit score often means knowing how to use a credit card wisely. The trouble is, having a credit card in your wallet can tempt you to use it a little too much.
When you charge things to your credit card, you should be prepared to pay off your balance in full the next time you receive your bill. If you don’t, and you carry a balance on your credit card, you’re going to pay interest on that amount. If you have a large balance, you could end up paying tens or hundreds of extra dollars each month. Only charge items you can afford to pay to avoid ruining your finances with costly interest rates.
Not Paying Your Bills on Time
You know that you have to pay your bills. It’s also true that paying them late is better than not paying them at all because if you don’t pay them, you could find yourself without a cell phone with the water turned off. However, paying them late can also cause trouble for your finances.
Not paying your bills on time has the potential to affect your credit score. This is more true of some bills than others. For example, most utility companies don’t report payments to the credit bureaus, but home mortgages, car payments, and credit cards do. Paying your bills even just one day late on a regular basis can result in hefty fines and your credit will take a hit. Always pay your bills on time!
Living Paycheck to Paycheck
Living paycheck to paycheck isn’t an uncommon phenomenon, but that doesn’t mean you shouldn’t aspire to more. Living paycheck to paycheck causes a lot of stress, and it can leave you in the red.
Things come up. The car needs a repair or an appliance needs to be replaced. Even holidays, like Christmas, can catch you unawares. You may rely on credit to get by, but as you have already read, that can be disastrous for your finances.
Even if you can only put away $10 or $20 a month, it’s better than nothing. After a few months, you’ll have an extra hundred dollars that could pull you out of a tight spot that you would have struggled with if you didn’t have a little money saved.
Cosigning a Loan for Someone Else
Maybe money in your bank account isn’t a problem. You have plenty of savings and you always pay your bills on time. You may instead want to help your friends and family with their money problems. That probably isn’t a good idea.
If you loan money, you aren’t likely to ever get it back, and if you cosign a loan, you’ll find yourself on the hook if they stop paying. Not only can it destroy your finances, but it will also likely ruin your relationship with the person you were trying to help. Instead, offer to help them create a budget and help them look for ways to increase their credit.
It’s often the little things we don’t think about that have the biggest effect on our lives in the long-run. Fix these simple mistakes, and your financial future will thank you.