Saving money sounds like a simple idea. You clip coupons, buy things on sale and call that saving money. There is actually much more to it. Many people make mistakes when it comes to saving money. Here are FIVE of the most common and what you can do to avoid them.
1. Not having a budget. When you do not have a budget, you have no control over your finances. You need a budget that works for you. Setting up a budget may seem like a daunting task (and the reason many just don’t want to do it), but it does not need to be that difficult. I’ve simplified this for you — right down to providing you with FREE FORMS and instructions to help you set one up for yourself. Learn how to create (and stick to) a budget!
2. Insufficient Emergency Savings. What would you do if you lost your job? Could you pay your mortgage or put food on the table? It is tough to find the extra money in your paycheck to build up any sort of emergency fund (trust me, I’ve been in your shoes). However, it is very important to do. If you have $1,000 or $2,000 saved, you are certainly on the right track.
It is important that you have at least 6 month’s of income saved. Just take a look at your budget to determine the amount you will need. Remember that you might have to cut things out of the budget or add things in (such as paying for your own health insurance). Read our tips on How to Create an Emergency Fund.
3. Not having a will or life insurance if you have young children. This is one thing you might not want to think about (it is one that is tough for me to even fathom), but what would happen to your children if something happened to both of their parents? It is important that you have a will which outlines who will care of your children. You can create a will yourself online and have it notarized – or you can consult an attorney to have one made for you.
You should also have life insurance. How will your children be cared for? Who will cover the expenses of your funeral and medical costs? Buy purchasing life insurance, you can rest assured that your family will be protected. Learn more about planning for the unexpected.
4. Buying just because you have a coupon or it is on sale. This is one a lot of people make. When they clip the coupons on Sunday morning, they see coupons for products they may not normally buy. Coupons should be used only on products you would purchase — even if you did not have a coupon. A coupon is not a free pass to purchase items simply because you can save.
The same holds true in the store. If you see something is marked down 50% off, only purchase if it is something you really need or might have been waiting to purchase on sale. Just because the price is right again, does not mean you should just purchase it for that reason.
A deal is a deal only when it saves you money and you don’t spend money just to get a deal.
5. Not planning to get out of debt. Living with debt is burdensome. I should know. I’ve declared bankruptcy and even worked my family out of more than $37,000 in debt (read my story). It was not easy to do, but not having that weigh me down is an absolutely amazing feeling!
It can be overwhelming to even know where to start to get yourself out of debt. I’ve got tips and steps to help you do just that. You can check out our entire series on How To Get Out Of Debt.
What mistakes have you made when it comes to managing your money, and what did you do to overcome them?