Do you find yourself in debt year in year out? You’re probably making money mistakes that are keeping you in perpetual debt. Wondering what these are? Don’t worry. We’ll pinpoint those mistakes and share handy money management tips, and even show you how you can stay debt-free.
Avoid these common money mistakes
When you’re carefree, it’s easy to make financial mistakes that will haunt you in the future. Let’s look at some of the money traps you should avoid if you want to attain financial success.
- Spending all your income – some people spend all their earnings without saving a dime. You may find yourself in this situation if you don’t create a budget and stick to it. Ideally, 50% of your income should cover necessities, 30% on wants, and the remaining 20% goes towards savings.
- Running up credit cards – while credit cards are convenient, they can put you in financial trouble once you start overspending them and carrying forward balances.
- Not saving for retirement – you won’t be working your entire life. If you don’t save now, you’ll be broke by the time you retire.
- Not setting goals – goal setting is an essential aspect of saving. It could be you want to buy a home or a car or invest in a project. Whatever it is, having a goal will motivate you to save more.
- Buy things they can’t afford – some people go for cars, housing, or other assets that they can’t afford with their regular incomes. So, they take loans and mortgages that they need to pay off for a long time.
- Not creating a college fund – kids grow up fast. Soon they’ll be out of high school and joining college. Without a college fund, you’ll be forced into debt paying for their education.
- Spending much on luxury – Avoid buying items that you don’t need or going for an exotic holiday as it will drain your coffers.
- Not comparing energy providers – shop and compare and find a pa energy provider that has the best rate. You could be paying way too much on your utility bill when there are multiple electric suppliers with better electric rates
Money management tips
Money management is all about tracking your income and where you are spending on then coming up with a plan. Below are practical tips to help you manage your finances better:
- Set your priorities – allocate your income to what you need or value most then other things can follow.
- Determine your monthly income – calculate your monthly take-home pay from your day job and side jobs. You can’t budget what you don’t know.
- Track your spending – find out how much money you spend. Write down each expense then categorize it to know where necessary expenses, wants, debts, and saving fall.
- Create a financial plan – allocate money to things that matter to you. Cut down expenditure on your lesser priorities and focus on the top priorities.
- Stick to your plan – of what use is a good financial plan if you can’t put it into action. Implement your plan every month; else you won’t succeed with money management.
- Set aside emergency funds – you can’t tell what the future holds, but you can prepare for any eventuality by setting aside contingency money.
- Refinance your debt – ease financial pressures by negotiating for a loan with a lower interest rate.
- Consider a retirement plan early – the sooner you start saving towards retirement, the more your money will grow.
- Look for free money – review your health insurance plan. You could be paying out of pocket for costs already covered by your policy.
Become debt-free with these steps
Paying off debt is usually a painful thing. Here are steps you can take to and eliminate debt and remain debt free.
- Pay more than the minimum payment – doing so will reduce the amounts you’re paying towards your loans and credit cards, and shorten the payment duration.
- Apply the snowball method – lists your financial debts starting with the smallest to the biggest then pay off the small debts fast.
- Get a side job – if you have a talent or a skill that you can monetize, then turn it into an income-generating activity and use the earnings to pay off your debts.
- Sell items you don’t use – look for things that you rarely use in your home and sell them online or to a dealer.
- Consider a balance transfer – move any credit card balance you have to your debit card to avoid unnecessary accrued interest.
- Kick expensive habits – don’t spend money on lavish goods or costly services, or else your debt burden will increase.
- Avoid temptations – hanging around spendthrifts is a bad idea as they could tempt you to spend money on things you don’t need and haven’t planned for.