5 Common Mistakes That are Costing You Money
We all know we need to save money. The list of things to save for is never-ending, from retirement to your children’s education to finally fixing that weird noise coming from your water heater. But when it comes to actually putting money away for them … well, sometimes life just seems to get in the way.
However, the importance of having money saved for your future cannot be overstated. So we’ve compiled some common mistakes people make when it comes to saving their money and ways to fix them to help you start achieving those savings goals.
Mistake #1: Not enrolling in your employer’s 401(k) plan.
It’s easy to think retirement is too far off in the future to worry about it now. Or thinking that your money would be better off not locked up for retirement. But thinking like that can cost you lots of money (and your lifestyle) in the future. And when it’s so simple to save with your employer’s 401(k) plan, it’s a mistake to pass it up.
Instead: Take full advantage of it! The beauty of enrolling in your employer’s plan is that money can be automatically taken out of your paycheck and invested in your future. And if your employer matches your contributions, it’s a good idea to consider contributing at least enough to take full advantage of their match—after all, it’s free money. Who can say no to that?
Mistake #2: Not paying yourself with each paycheck
A common practice is to save whatever is left over from each paycheck. But this can lead to over-spending and under-saving.
Instead: “Pay” yourself a designated amount each month to put in your savings account—if you can set up an automatic transfer, that’s even better. By “paying” yourself first you have a more realistic view of what you can actually spend that month and it’s not as tempting to skimp on the savings in favor of buying things you don’t need.
Mistake #3: Keeping your checking and savings accounts at the same bank
Sure, it seems pretty convenient to keep everything at one bank: easy to monitor, easy to set up, and (here’s the kicker) easy to transfer. When transferring money from your savings account to your checking account is as easy as a click of a button, it becomes much more tempting to spend that hard-saved money on non-emergencies.
Instead: Separate your accounts. If you keep your savings account in a different bank than your checking, the process of transferring funds from savings to checking becomes a tad more inconvenient—and that’s a good thing! That makes you really think about whether that money will be used for an emergency, whether it’s worth the transfer or not, and when the money should just stay put. As a bonus, if you separate your accounts, you can shop around to find the best interest rates for your savings account.
Mistake #4: Paying off your debts with your savings funds
While it’s great that you’re working to pay off debts, it shouldn’t be at the expense of your entire savings account. Depleting your savings in order to work off your debt puts you in a pretty vulnerable position. If your car breaks down or your roof leaks and you don’t have any savings, suddenly you’re taking on more debt and are worse off than before.
Instead: Try to find other spots in your budget that money can come from—it may seem like a drag since the money is sitting right there in your account, but having an emergency savings account is important to ensure you and your family’s financial security. We recommend building up to have at least $1,000 in savings and then focusing on debt repayment.
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Mistake #5: Pretending to understand services (when you really don’t)!
It seems like all these banks and financial institutions are always throwing offers your way that sound good but are littered with terms you just don’t understand. All that financial mumbo-jumbo can make your head spin and cause you to either accept an offer that’s not right for you or turn away from one that’s perfect.
Instead: If you’re not sure, just ask. It sounds too simple but far too often people are paying way more than they should for something and they don’t even know it. If there’s a term you don’t fully understand, it’s worth a call or email to your bank, insurance agent, or other trusted financial source to ensure you know exactly what you’re getting and how much you’re paying.