Many of us have great intentions when it comes to handling our money. We often think we’re doing all the right things when we’re handling money, and usually we’re doing a good job of it. But there are a few mistakes we might be making, unknowingly, and these mistakes could cost us some of that hard-earned money. Here’s a list of five mistakes we often make:
Think Spending is Saving
Perhaps the most obvious mistake in the book is saving money by purchasing items that are on sale. The idea that you can save money by spending money is one of the oldest myths of frugal-living, one happily perpetuated by corporate marketing departments the world over. In order to avoid this mistake, always remind yourself that you’re not saving money when you make a purchase, even if that purchase is half-priced. You are still spending money. The better deal is only worth it if it is an item you need, in which case you aren’t so much saving money as increasing the value of your dollar. Likewise, saving money is different than investing it. You should have a solid understanding of what it means to spend money, save money, and invest money. If you know these three basic actions, then you’ll be able to manage your money much better.
Forget the Mail-In Rebates
Mail-in rebates are tricky, and really depend on the individual shopper. Companies use these promotions to attract consumers to their products, and then they bank on the consumers’ failing to send off the rebate. How you approach rebates should directly stem from what you know about yourself. Are you a doer? Do you follow through on your tasks? Then you’ll probably benefit from buying products with mail-in rebates. But if you are someone who is forgetful or doesn’t like the added hassle, then you should look for other sorts of promotions that you can benefit from. In other words, you should understand what sales techniques you’re susceptible to and what sales techniques you can confidently take advantage of. Be a smart consumer.
Fail to Invest in a 401(k)
You’d be surprised to learn this, but many don’t actually take advantage of their 401(k) options. This is especially egregious if the company will match your contributions! That’s free money for your retirement. It makes no sense to fail to take advantage of this opportunity. If you haven’t done this already, you should immediately talk to your human resources contact and get this set up in your employee account. Actually, the greater mistake here is to not have a retirement plan. Start planning for your retirement as soon as possible.
Budgeting is an important part of managing your finances. If you’re not budgeting, then you had better get started. However, if you’re budgeting, but still breaking your budget, then shame on you! You’ve put in all that effort to manage your money only to succumb to an errant purchase of frivolous mistake. I’m talking here about breaking budget for unnecessary expenses. You’ll certainly have occasions when you cannot avoid a big expense and have to break budget; these emergencies are understandable and do happen. All the more reason, then, to avoid unnecessary expenses that can hurt your ability to handle financial emergencies. Hold yourself accountable to the financial goals you have made for yourself.
Get in Bad Debt
Putting off paying for things is a large part of our economy. We are a credit-based economy in many ways, so it’s natural that you’ll have some sort of debt. However, you must understand the difference between good debt and bad debt. Credit card debt is an example of bad debt. It’s debt that has no discernable return. A mortgage or other loan, like for school, is an example of good debt. Good debt has a payoff, one that hopefully can improve your future financial situation. Know the difference between the two and cultivate good debt, while paying off your bad debt.
This guest post is contributed by Raine Parker, who writes on the topics of accounting degree. She welcomes your comments at her email Id: firstname.lastname@example.org.