If your spending is wasteful it is much harder to save some money on the side. Many people earn large sums and yet fail to accumulate wealth, save for their retirement or have a great lifestyle. The main culprit is wasting money carelessly. If you can conquer your spending you can manage and have a good life with modest income. Here are 10 ways to avoid making money mistakes. Probably you will be able to come up with a few more yourselves when you think about it.
- Building Up Credit Card Debt
Even with current low interest rates, credit cards are one of the most expensive methods of borrowing money. Many people make the mistake of putting off paying back credit card balances. After all, it is not hard to do and you can only pay the minimum amount. It may be convenient to pay with credit cards and you may have cash backs and airmiles. But you can set a direct debit to pay off your outstanding balance at the end of each month. This way, you have all the benefits and don’t pay interest for the privilege.
- Not Taking Advantage of 0% Interest Offers
Card companies can actually help you get out of it if you have already built up a large credit card debt. They regularly offer 0% interest periods up to 18 months. You can get as much as your credit limit and pay off any other credit card balance or debt. Apart from around 3% arrangement fees, you get to use the money free for a long time so that you can get out of debt faster. You should never miss a payment once you get such offers because your interest will revert to a standard rate once you fail to make at least the minimum payment.
- Rushing through Supermarket Shopping
Grocery shopping is large part of your budget and it is a recurring expense. You should figure out how you stretch your money when you are out at supermarket. You should take your time to find out about special offers and best buys. If you rush through you start making impulse purchases and missing the items you need. Also, you shouldn’t go out shopping with an empty stomach.
- Not Using your Tax Free Allowances
Most countries allow certain amount of money to be invested tax free each year. For example, you can invest over £11,500 on tax free ISA if you live in the UK. Other countries have different arrangements and pension allowances. This is not tax evasion since you are allowed by the government not to pay tax if you fit in their criteria. Keep putting money away tax free wherever possible.
- Going Overdrawn in your Bank Account
One of the main problems with people who are in money trouble is that they cannot manage their money well. Still using your debit card when you don’t have money in the bank will cause a few problems. First of all, you will start getting overdrawn. Most banks will pay the transaction on your behalf but start charging excessive interest and fees for it. If this problem persists your bank will start rejecting your payments that will cost you further on fees and charges and ruin your credit score.
You have to find a way to manage your money better. And you may want to arrange an overdraft facility just in case you make occasional mistakes. However, you have to correct the underlying wrong attitude. Otherwise you will start going over your overdraft limit in no time.
- Not Shopping Around for Car Insurance
Just like groceries, vehicle insurance is a recurring expense as well. For example, most policies in the US are renewed every 6 months. You have got to get to the bottom of it at your next renewal and find the cheapest automobile insurance for the coverage you need. This doesn’t mean that you don’t buy what you need but it is buying required cover at a reasonable price.
It is so easy to shop around for auto insurance these days that it is almost like a child play. You find a good comparison website like http://cheapautoinsurance.net and get a few quotes quickly. You can go direct and get quotes from each company as well. But this takes time and pointless since a comparison website will include offers from quite a few companies.
You can do the same for other insurance products for your home or business. The internet brings all the discounts and special deals to your fingertips that it is almost a crime not to shop around. You can find almost everything at much discounted prices online from cars to microwaves and from shoes to tyres.
- Not Paying Utilities Bills by Direct Debit
Most utilities companies offer discounts for paying your bill by direct debit these days. You will have to pay your electric, gas and telephone bills anyway. So, why not set up a direct debit to save some money and make sure that you never miss a payment. Any missed payment will affect your credit score and that in turn will affect your interest and car insurance rates.
- Not Buying Life Insurance
This is one spending that not making would be a mistake, especially when you have a family. You may be young and healthy but there is no guarantee that you will survive the day. Then, what will happen to your family? Not only they will have to deal with the grief of your death but face the financial hardship because of lost income or a homemaker. Both partners should have sufficient life insurance regardless of them working or staying home to look after children.
- Not Saving and Investing Enough
You can work as hard as possible but you may not achieve financial freedom unless your money works for you as well. You must start saving some of your income so that you can put it into investments. The early you start investing the better since most things you invest will go up in value over time.
- Not Looking after Your Credit Score
Today, everybody wants to know your credit score before they consider you for a loan, mortgage, auto insurance or apartment rental. Your credit history is the key to many doors. When it is bad you will either be rejected or have to pay a lot more interest or premium. Always stay on top of your payments and credit position. You should get your own credit score using companies like Experian and see where you stand at and how you can improve.