How to Fix Money Mistakes
Many people worry about making money mistakes and this makes sense. After all, you work hard for your money and you don’t want an error to cost you financially and set you back. It can feel awful to make a mistake or end up in a bad situation, and usually the worst part is thinking that there’s nothing you can do to fix it. However, the good news is that most money mistakes can be corrected.
Here are some common money mistakes and what you can do to fix them.
Carrying Credit Card Debt & Only Making the Minimum Payments
Credit card debt is very expensive to carry. If you make purchases on your credit card and don’t pay the balance off quickly, the cost of carrying this debt adds up. That’s because most credit cards charge high interest rates. The longer you take to pay off your debt, the more it costs you.
One common mistake people make is only paying the minimum required payment each month. Paying the minimum will keep your creditors from getting upset with you, but it will also cost you a lot and your debt will take a very long time to pay off.
If you’re carrying credit card debt and you’re only able to make the minimum payment, review your budget and look for places to cut. Any savings you can find in other areas can be applied to your debt, helping you pay it off more quickly.
Not Having Any Savings
Savings are important for many reasons. You might be saving to reach a financial goal (such as buying a home or taking a vacation), saving for retirement, or saving for emergencies. Not having emergency savings is a common money mistake and one that can lead to big issues.
If you don’t have anything put aside for emergencies, this can be a big financial risk. Life is unpredictable and, if you don’t have any savings, you could end up having to take on debt if you’re faced with an unexpected expense.
If you don’t have any savings, it’s a good idea to start building up over time. Even if you can only put a few dollars aside each month, this is better than nothing and it will grow the longer you keep going.
Not Having a Financial Plan
Everyone should have financial goals and a plan for how to achieve them. Otherwise, you’ll have difficulty spending your money in ways that are important to you and this often leads to wasting money or losing track of where your money has gone.
Set clear goals based on your priorities (such as paying off your debt, saving for a vacation, etc.). Break larger goals into smaller stages to keep yourself motivated. Having both long- and short-term goals is important.
Once you have your goals, create a plan for how you will achieve them. Factor your budget into this plan and do what it takes to reach your goals.
Spending Too Much on Something Unnecessary
Overspending is a common money mistake. If you’ve spent too much money on an item, a hobby, or an experience that you really couldn’t afford, this can cause trouble for your budget going forward.
If you can return the item, that’s a good idea. If you’re not able to return it, see if you can sell it online. You probably won’t get all of your money back, but you might be able to reduce the damage. If neither of these options work, you’ll need to go into your budget and make cuts. Trim your spending wherever possible, then create a plan that will help you avoid overspending in the future (such as tracking your spending accurately or shopping with cash instead of credit).
Falling Behind on Payments
It can be hard to get back on track if you fall behind on bill payments. This is a common money mistake and a costly one. Missing payments likely means you’ll be hit with extra charges and penalties that can really hurt financially. Plus, it can also negatively affect your credit rating, which can have significant financial consequences.
The first step is to get caught up. Look at your debt and figure out exactly how much you owe, then come up with a plan to get current with your payments. You may want to talk to your creditors to sort everything out.
The next step is to make sure you don’t end up in this situation again. Adjust your budget so you always make sure to have enough to meet your financial commitments. Create a schedule and set reminders so you don’t forget to pay your bills.