 Regardless of how much money someone makes or what lump sum of inheritance they have received, it’s easy to make mistakes and go through money faster than you may imagine. Anyone can waste their hard-earned income, time, and potential future by poor planning and bad decisions. Habits also factor in to how well you handle your finances, or not. It’s not always how much you earn or how much you save; it’s how well you manage it. You could amass a wealth of fortune, but lose it just the same if you aren’t aware of the pitfalls. These are the 10 worst mistakes people make with their finances.
1) Gambling
This may be the most obvious mistake to some, but possibly not to others. Gambling needs to be considered as a form of entertainment and any money you bring to a casino, you should expect to lose. It should be considered spending money, not an investment. If you plan on using gambling to generate income, you will almost always end up on the losing end of the equation. Many fortunes have been lost in the casinos and racetracks. Many families have been ruined by compulsive gambling – which is easy enough to get caught up in if you’re not careful, or if you have tendency towards compulsive behavior to begin with. Short term wins make gambling a very exciting, addictive endeavor; but, the truth is that in the long term you are almost guaranteed to lose.
2) Applying for Multiple Credit Cards
Adults are at risk the second they turn eighteen, because that is when credit card companies begin to flood mailboxes and spam folders. It is incredibly tempting to give in and apply for a card or line of credit, because many see it as free money until they max out their limit and begin to accrue interest. Applying for multiple credits cards to pay off existing debt won’t necessarily work either. Millennials often lack proper education regarding finances and responsibilities such as credit scores, so it doesn’t become an immediate concern until it begins to haunt them. If credit card debt is not paid off in a timely manner it will begin to hurt your credit score. Credit can take a significant amount of time to repair and is crucial in getting approved for leasing an apartment or even getting a job. The more credit cards you apply for, the more your credit score will suffer because of it and take longer to mend.
3) Not Investing in Retirement
Not every employer offers retirement savings benefits such as a 401K, but that doesn’t mean working adults shouldn’t still strongly consider investing in their future. Humans cannot work forever. Even if the mind is eager, the truth is that the body will eventually slow down and not be able to keep up with the physical demands of the work force. If you don’t invest in later retirement while at an early age, then there will be little for you and your potential family to rely on thirty years from now. No one should have to work forever, and it shouldn’t be the responsibility of your children to afford your cost of living (unless of course they make way more money than you and manage it well).
4) Not Researching Student Loans
The pressure to pursue a college education can be overwhelming in modern times, especially when a larger percentage of millennials are logging hours towards a degree. Even men and women of older generations are making the brave and bold decision to return to school and earn a degree. The problem is that the majority of college students are thousands of dollars in debt when they graduate due to often forced and uneducated decision to take out a student loan. Many students pay for school independently and are unable to rely on parental income for tuition purposes. Others sign contracts before researching all of their available options. While loans are designed to be eligible for student re-payment plans, most graduates don’t end up making enough income right away to send their payments on time, which results in high interest and even defaulting on loans, thus putting them even deeper in financial debt and defeating the purpose of higher education.
5) Not Creating a Budget
Budgeting has a lot of the same logic as saving money however the means of going about it is slightly different. Budgeting does indeed help a person save in the long run, but it is more about having conscious spending habits in different areas of your life. People who don’t create a personal budget or one for their family often get blindsided by forgotten expenses or unexpected costs. Adults are encouraged to create a weekly or even daily budget to account for the maximum amount they should be allowed to spend on everyday items and activities such as going out to eat, groceries, laundry, gas, coffee, entertainment, night life, and even home maintenance. Budgeting not only creates awareness of your finances in the bigger picture, but it is an organizational technique that helps practice discipline and effective decision making.
6) Not Saving
This one is rather blunt, yet an outstanding amount of adults earning any sort of income do not practice efficient money saving habits. Savings accounts exist in both banks and online to assist individuals in doing just that— saving money. There is no designated purpose other than to accumulate funds and let them be compounded over time while occasionally adding a few bucks here and there. It is rather simple. Those with access to direct deposit can elect to have a certain percentage of each paycheck automatically deposited into a savings account while the rest goes into their usual checking account. Doing this is a means of blindly saving, or rather forgetting that the savings are there so you are less likely to attempt to withdraw from it. Saving money will set you up for comfortability, whether it is in the far future or in the case of an emergency. Many who are successful with their finances even utilize their savings for their children’s college education or family trips.