Years ago when the economy took a turn for the worse, millions lost their jobs, depleted their savings, and accumulated tons of debt. It was then that the topic of proper money management practices began to be at the forefront of everyone’s thoughts. Luckily the economy has, since then, improved; however, there are millions of Americas who are still trying to recover from that dreadful time period. Whether you are one of those people are not, avoiding making these 3 money management mistakes listed below can drastically improve your financial situation.
Misusing credit card reward systems. This was one the I personally struggled with for years. Major credit card companies lure us in with seemingly appealing rewards programs, but the truth of the matter is that they only result in more debt. For example, my Amex EveryDay credit card has an amazing rewards system that gives you points for every purchase you make (some purchases even qualify for double points). In addition, if you make 20 or more purchases within a billing cycle, you receive 20% more points on those purchases. Because I wanted to take advantage of what I thought was a good deal, I would attempt to make at least 20 purchases on the card each month. After awhile I found myself making unnecessary purchases, just to reach the 20 purchase minimum. In hindsight, that wasn’t such a smart move and the more I talk to other people, the more I find out that there are tons of others out there doing the same thing. So in short, use credit cards wisely. Don’t let an attractive rewards system get you into further debt.
Living Above your Means. Trying to keep up with the Jones’ can land you in a world of financial trouble. We all can’t be minimalists, however spending too much money on things outside of basic necessities isn’t a smart idea. For example, when I bought my first home earlier this year, I decided that I would ditch cable television–something that I refused to do before then. When I did have cable, I was paying about $80/month ($1,080/year), mind you I only really watched a total of 10 channels. To replace cable t.v., I got Netflix ($7/month, $84/year) and I purchased an Amazon Firestick for each of my three t.v.s (one time payment of $100 ea.=$300). So ultimately by ditching cable and replacing it with other sources of entertainment, I saved a total of $696 ($1,080-$384). I still get to watch all of the shows that I did with cable t.v., plus I get to watch tons of additional shows and movies on Netflix. If that doesn’t call for a victory dance, then I don’t know what does!
Not Keeping Track of Your Spending Habits. Keeping track of where your money is going is the key to managing your money effectively. Creating a budget is a great way to “assign” your money to certain things and visually track its use. Review your bank statements on a monthly basis can also help you to track your money. There are a number of mobile apps that have been created for the sole purpose of monitoring spending habits. My favorite is Mint. The Mint app connects to your bank accounts and keeps track of the amount of money you spend, where you spend it, as well as how often.
Your financial state is affected by your daily habits. Adopting proper money management practices and avoiding common mistakes like the ones mentioned above, can ultimately help you gain financial freedom and independence.
All The Best,