To date my biggest financial mistake was not to diversify stock market investment. I did invest all my stock money in one stock, eventually the financial giant got vaporized along with all my investments. We all commit some kind of a financial mistake in our life. This article from guest poster Joshua should make you cautious and little bit more aware to not to commit a major financial mistake. Enjoy the post!
You work hard for your dollars as do I. When we make financial mistakes, those hard earned dollars seem to fly right out the window. Even worse, often times, we don’t even know that we are actually making a mistake at all. Therefore, even though you make a pretty good living, you may still feel like you are constantly in the red. Here are some of the most common financial mistakes that consumers make and what you can do to avoid them…
#1 Mistake – Overuse Of Credit Cards
When used properly, credit cards make for awesome financial tools that can help you on your journey to financial stability. However, if you don’t use them properly, you could find yourself in a very bad financial position. The worst part about this is that, although credit cards are important in some ways to a financially stable lifestyle, there is no middle or high school course that I’ve ever heard talking about them.
That being said, when most of us get our first credit cards, we look at them like a great way to get things that we couldn’t afford yesterday. When the first one is close to an uncomfortable balance, we often go after another. This revolving process eventually leads to financial hardship for many people.
How To Avoid Overuse Of Credit Cards
The key here is limiting the amount of credit cards you have and what they are used for. I generally advise my clients to have 2 credit cards at most. The one with the lowest interest rate would be the card that’s used for large emergency purchases because holding a balance there won’t cost as much as holding a balance on the other card.
The second card is for the security credit cards offer in day-to-day purchases. This would be your rewards credit card ideally. Of course, the day-to-day purchase card would be paid off completely on a monthly basis. The day you can’t afford to pay off the day-to-day card, you realize it’s time to cut back on spending and get your finances in order.
(Related – When Should you Use a Credit Card?)
#2 Mistake – Food Waste
We often see CNN specials talking about how much food Americans waste annually and, it’s astonishing to see the totals. That food waste often equates to thousands of dollars annually in some households.
How To Avoid Wasting Food
What works for me is a pay period shopping day with an iron clad list. I admit, I used to be one of those shoppers that would go out whenever I thought I needed something. I’d go to the store for milk and come out with $50 worth of food that I didn’t always eat.
(Related – Tips To Stay Away From Impulse Buying)
About a year ago, I started to realize how much money that was really costing me. I did some math and noticed I was easily spending $450 per month on food. That just didn’t make sense. Now, I shop the day after pay day.
Before I go shopping, I make a list of everything I might need until the next pay day. This way, I don’t make frivolous purchases on those extra trips during the week and I have everything I want. Now, I eat like a king, waste very little and spend about $200 per month on food!
Another thing I did to save money on food is change my eating habits all together. I used to love shopping in the inner aisles of the store. However, I found out that just about everything in the inner aisles of the store could be made with the fresh items you find in the cold wall aisles of the store.
Not to mention, because it takes money to prepare the items you find in the center aisles and money to package them, it is more often than not much less expensive to make what you enjoy right at home.
(Related – Some reuse of Fruit Waste at your Home)
Mistake #3 – Not Budgeting
Believe it or not, majority of American households do not run on an active budget. Yes, they like to have a little savings and try to make their payments for everything on time but, without a budget, many people often waste quite a bit of money that could be used in very productive ways.
How To Avoid Being Bit By The Decision To Avoid Budgeting
The bottom line is, to live a financially stable lifestyle, you are going to need a budget. The good news is no matter how much income or how many expenses you have, making a livable budget shouldn’t be much work.
I prefer to make spreadsheets that cover my monthly expenses, debts, income sources and my savings and debt relief goals. I recently wrote a guide to making the budget spreadsheet that I use. Please feel free to read the guide and get yours started! Also, here are some budgeting Tips from SB.
(Related – How to Stick to Your Budget Consistently)
Mistake #4 – Not Monitoring Credit Reports
Your credit report is one of the most important reports you will come across in your life! Although the number of consumers that are monitoring their credit reports continues to grow, there are still tons of people who have absolutely no idea what is being reported with their name and social.
Not knowing what is being reported could lead to inaccuracies on your credit report or, even worse. If you don’t monitor your credit report you will not be able to act quickly in matters like identity theft.
The Fair Credit Reporting Act (FCRA) requires each of the nationwide credit reporting companies — Equifax, Experian, and TransUnion — to provide you with a free copy of your credit report, at your request, once every 12 months – Federal Trade Commission
How To Get, Check And Monitor Your Credit Report
Don’t worry, I didn’t write this article to try to get you to sign up for a free trial of some free credit report website that you have to give your credit card number to get! The truth is, your credit report is free once a year from each credit reporting agency.
Although, not all reports will be exactly the same across the board, they are generally pretty similar. That being said, unless I notice an inaccuracy in the first report I pull, I request a copy from each one every 4 months. This way, I know exactly what is going on 3 times a year!
Getting your credit report is pretty simple, go to www.AnnualCreditReport.com and follow the steps to requesting a copy of our credit report. Once you get your report, the important part is taking the time to read every word on it. In most cases, you will find that your credit report has more information about you than you thought. If you find any mistakes in your report, you should dispute them right away.
To dispute a remark on your credit report, simply go to the website for the reporting agency that is reporting the inaccurate information. Once on the website, look for instructions on how to dispute inaccuracies.
These are all financial mistakes that are made by several people each and every day. However, in most cases, these mistakes are made as a result of lack of knowledge that they are even making them. I hope that my article has made you aware of important aspects of obtaining financial stability. If you have any questions, concerns or just want to say hi, please feel free to leave a comment below.