Managing your finances can feel like navigating an obstacle course. You have to resist temptations to make impulse buys on a daily basis, family members ask for financial help or advice and you risk overspending at the grocery store because you forgot to make a list — to name a few.
But keeping your finances in check doesn’t have to be so tricky. Once you take the time to learn from some of the financial mistakes you’re probably making, you can apply solutions to counteract them. Then, you can focus on adding to your children’s college fund, reducing debt or padding your retirement nest egg.
Click to find out how to identify and solve financial mistakes so you can stop throwing your money away.
Mistake: Failing to Monitor Recurring Expenses
Recurring expenses often involve automatic payments, which can drain your bank account or increase your credit card balance every month with fees you authorized for everything from monthly bills to subscription services and gym memberships. Taking your eye off these monthly charges can cost hundreds of dollars per month, making this one of the biggest financial mistakes you can ever make.
Solution: Review Your Statements Monthly
Learning how to grow money begins with eliminating waste by looking at all your credit card and bank account statements for errors, overpayments and opportunities to save. Be strict with yourself, and find ways to cut out non-necessities.
Mistake: Failing to Take Advantage of Extra Income Opportunities
Not building up a substantial enough nest egg during your earning years is one of the retirement mistakes people live to regret. While you can, there’s no reason not to maximize your earning potential through the various income opportunities that are available to you without ever leaving home like freelance gigs.
Solution: Consider Starting a Cheap Business or Side Hustle
Opening a small business adds extra income and allows writing off some expenses such as transportation, insurance, marketing and office expenses. An alternative to starting a small business is to find a side hustle that you can use to earn money when you have extra time, such as being a Lyft or Uber driver.
Mistake: Ignoring Credit Card Balance Transfer Offers
Trashing credit card balance transfer offers that come in the mail could be one of your biggest financial mistakes. By ignoring those offers you could be paying unnecessary interest charges that can add up over time, so take the time to investigate.
Solution: Consider 0 Percent APR Balance Transfer Offers
In 2017, the average credit card APR was 14.44 percent. On a credit card balance of $3,000 with 14.44 percent interest, a 0 percent APR balance transfer could save you over $36 monthly and over $433 annually in interest charges. That’s $433 that you can add to your retirement nest egg — and with no interest, you can finally pay off that credit card debt once and for all.
Mistake: Leasing a New Car
Leasing a car is the equivalent of renting an apartment. You’ll have the use of something you need, but you won’t build any equity; basically, you’re throwing money at something that will never really be yours. Plus, if you exceed mileage restrictions, you’ll end up owing even more money at the end of your car lease contract.
Solution: Purchase a Cheap Used Car
Buying a dependable used car allows you to either buy it in cash or pay off the loan faster to so you can stop paying interest and get rid of your car payment altogether. Today’s cars can last well up to 200,000 miles and bring savings of $30,000 or more to the owner in as little as 15 years, according to Consumer Reports.
Mistake: Going Into Debt for Wedding and Honeymoon Expenses
Marital vows are often accompanied by debt for the rings, dress, ceremony, reception and even a honeymoon with couples spending an average of $33,391 on wedding bills. Normal monthly obligations combined with potentially outrageous wedding and honeymoon costs can cause many couples to struggle financially during the early years of their marriage, leading to arguments, depression and other problems. which could lead to divorce.
Solution: Get Creative and Save Money
To save on your big day, the bride and groom can come up with a variety of money-saving ideas about the venue location, reception size and the honeymoon to reduce every possible expense to the minimum so little to no borrowing is required. By teaming up to reduce wedding expenses, a couple will learn to communicate better about finances and make tackling future financial issues easier.
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Mistake: Upgrading to the Newest Cellphone
Owning the newest phone is tempting but unnecessary, especially if your existing phone works just fine. With the newest iPhone models starting around $699, upgrading your family’s phones to the newest models can cost a lot of money. Payment programs are often available, but you’ll probably pay more than the purchase price, depending on interest charges.
Solution: Avoid Replacing Your Phone Until You Must
On average, people in the U.S. will replace smartphones that are 2.46 years old or older in 2018, according to a study from Statista. When your phone is only a year old, avoid following the masses and consider waiting another year or more to get a new phone, which can save you hundreds of dollars.
Mistake: Shopping When Depressed, Lonely or Bored
Retail therapy can result in spending money recklessly on things you don’t need in an attempt to make yourself feel better. Plus, if you use credit cards for your impulse purchases and don’t pay off the bills before interest charges accrue, you’ll rack up an endless cycle of debt, which is one of the biggest financial mistakes you can make.
Solution: Only Spend on the Best Deals
Turn your need for retail therapy into a game by finding the best price on every single purchase your household regularly uses with the use of coupon apps and money-saving websites. It can be thrilling to go from mindless spender to savvy shopper.
Mistake: Staying Loyal to an Expensive Cellular Provider
By being loyal to your cellular provider and not investigating the costs and competition, you might be overpaying every month. Just because you receive good service doesn’t mean you can’t get the same thing for less money.
Solution: Shop for a New Phone Provider
Take a look at your plan with your existing carrier and try to reduce your costs first. To keep your business, a representative might offer you a much better deal. Then, compare prices with a different carrier to determine how much you can save.
Mistake: Buying More House Than You Need
It’s easy to overspend by buying too big of a house for your needs. The larger the home, the more money you will spend on mortgage payments, taxes, insurance and maintenance and utility costs — which can add up quickly. Plus, if you stay in your home after you retire and your kids have moved, you won’t likely need such a huge home.
Solution: Choose a Home That You Can Retire In
Plan ahead by buying a house that meets your needs when you’re in the midst of your career and parenting, but doesn’t cause you to overspend. By doing so, you can keep your monthly expenses low enough so that you can use the savings to pad your retirement fund, and you can pay off your home before you retire — or sell it and make a profit.
Mistake: Living Beyond Your Means
One of the biggest mistakes people make in their financial lives is living beyond their means and ending up in debt. Spending what you can save for retirement is a classic retirement mistake and can often lead to long-term financial stress and arguments with loved ones, as well as bankruptcy or perhaps divorce.
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Solution: Minimize Your Budget and Pay Off Your Debt
You can save a lot of money if you separate your needs from your desires and commit to a bare-bones budget to spend within your means. You might be surprised how much progress you can make toward paying off debt by cutting frivolous expenses and focusing on an aggressive payment plan. Make it easier by using one of these 15 easy-to-use budget templates.
Mistake: Eating Out Too Often
The average U.S. family spends over $3,000 per year eating out, according to data from the Bureau of Labor Statistics. That’s $3,000 that you could be putting toward retirement, debt or a college fund. Look for ways to save money when eating out so you can gain control of your spending to achieve long-term financial goals.
Solution: Eat at Home to Save Money
According to the USDA, a family of four will spend around $241 on groceries for their combined 21 meals per week, costing a surprisingly small $2.87 per meal for each person. In addition to saving money by eating home-cooked meals daily, preparing your own meals can be healthier than grabbing fast food laden with fat and sodium.
Mistake: Cosigning a Loan or Lease
It’s understandable to want to help your children or a friend that is struggling, especially if all that’s needed is your signature on a car loan or an apartment lease. But, you could find yourself in an uncomfortable situation if the payments you cosigned for are running late and the creditors start demanding that you pay up immediately even though it’s not your loan. To avoid ruining your own credit, you’ll have to comply.
Solution: Offer to Help in Other Ways
Whenever someone asks you to cosign a loan, you risk adding to your debt if you agree, as well as potentially ruining a relationship. There are other ways you can help such as offering the person temporary use of your vehicle or giving helpful advice for improving their credit rating or securing a loan without a cosigner.
Mistake: Relying Only on Savings Accounts
Relying on a savings account to provide you with retirement funds is one of the biggest financial mistakes you’ll end up regretting. The interest a bank pays on your money will likely never keep up with inflation, so even though you are putting money in your bank account, it’s shrinking in purchasing power every day.
Solution: Diversify Your Investments
Diversification will prevent all of your eggs being in one basket at the same time. The safety and liquidity of your bank account is important for an emergency fund, but to keep up with inflation, consider opening a small stock market account and use one portion to buy stock in a few stable companies and another portion to buy registered securities such as corporate or government bonds.
Mistake: Buying Combo Meals
When many customers hit a fast food joint to get an advertised dollar menu item, they often end up ordering a more expensive combo meal, according to Barron’s. Deals like these trick you into thinking you’re saving money, but you usually end up buying and eating more than you would have otherwise.
Solution: Compare Menu Prices Ahead of Time
Dollar menu deals vary from chain to chain, but you can save money by deciding what you’ll order before you go in and sticking to it. Otherwise, you’ll risk being a victim of impulse buying.
Mistake: Supporting a Daily Coffee Habit
Although spending a few bucks each day on a coffee drink might not seem like a big deal, it can add up over time. For example, if you spend $4 per day, five days per week, that’s $80 per month. In a year, you’ll spend $960 dollars. In 10 years, you’ll have spent close to $10,000 on convenience coffee.
Solution: Brew Your Own Coffee
You can save tons of money for your retirement by bringing your own coffee from home on the road with you to work. After you buy an insulated coffee cup, you’ll pay about 8 cents per cup brewed at home, and you’ll save over $900 per year. You could drink coffee from home for over two months before the cost would add up to one drive-thru coffee.
Mistake: Going Into Debt to Earn Airline Miles
Traveling using airline miles you earn can save you money or drown you in debt — depending on your spending habits. According to one major airline, a single free domestic round-trip ticket will require 12,500 earned miles, which can be achieved by spending $8,000 on a credit card. Taking on additional debt to fly free just doesn’t make sense.
Solution: Pay Off Your Card Each Month
In addition to earning airline miles by opening a new credit card, the way to earn maximum reward miles is to use your airline mileage credit card for all your regular expenses such as gas, groceries and utilities that you’d normally pay for with your debit card. Then, pay off those credit card charges monthly with funds from your paycheck.