It can sometimes be challenging to balance all of your financial responsibilities with your short and long term goals, and when you make money mistakes, it just compounds the problem. Avoid making some of these common money mistakes, and you should be well on your way to better financial health and peace of mind.
The secret to achieving most of your financial goals is relatively simple, don’t spend so much money. You can’t put money away for your goals if you spend everything you earn. Use your dreams as your motivation to save money. For example, if saving to buy a home is high on your list, that goal should get priority over frivolous spending. Try to keep a minimum of 20 percent of each paycheck. You probably have more opportunities to cut back than you realize. For example, instead of buying lunch at work, bring a sandwich from home and put the rest in a saving account.
It’s easy to end up owing too much on your credit cards. A shopping trip there and dining out a couple of times a week, and before you know it, the minimum payment on your cards requires a significant chunk of your paycheck. Then the interest charges add up further, and before long, you’re in way over your head. Avoid this scenario by never charging more than can be pay off at the end of each month.
If you use your credit cards for everyday things, or to cover unexpected expenses on a routine basis, it’s time to take a good look at your budget and spending habits. If you don’t have an emergency fund, it should become one of your highest financial priorities.
Primary Residential Mortgage encourages homeownership, but we discourage being “house poor.” It’s way too easy to spend too much on housing, especially if you live in a major metropolitan area. Try not to spend more than 30 percent of your pretax income on housing. Of course, the amount you decide to spend on housing depends on your personal financial situation. For instance, many young people have student loans that eat up too much of their take-home pay, and therefore, they shouldn’t even reach the 30 percent benchmark.
Putting off saving money for your future is a common problem in most households. As a society, we tend to place a higher value on short-term thrills than long-term goals. Of course, another issue is the lack of funds. Many young adults feel like they can’t save anything, let alone enough to make a difference. But saving even just a small amount matters, especially early on in your career. That’s because time and compounding interest work to your advantage.
Now that you are aware of common money mistakes that you should avoid, do what you can to improve your financial situation and follow a budget. Remember, if you have credit questions or have questions about home loans, Primary Residential Mortgage is always happy to help.
Note: Opinions expressed are solely my own and do not express the views of my employer