5 Worst Financial Mistakes You Can Make
When you sit down to write out your budget or work on a long-term financial plan, you may be trying to make changes to your budget. There are some common money mistakes that people make when they are handling their finances. There are many big financial mistakes people make that end up hurting them in the long run, as well as financial blind spots that people don't even realize they're overlooking. However, don't despair, because you can take steps to fix your mistakes. Learn from these mistakes, so you do not make the same mistakes in the future.
Save Money by Dropping Your Health Insurance
When you are looking to save money, you may want to drop your health insurance, especially when you look over the last year and realize you did not go to the doctor at all or just once. There have been years when I have not used my health insurance at all, and it is frustrating to send that monthly payment in or see how much it affects my take-home pay.
However, I have years when we have used our health insurance a lot. You never know what is going to happen. It may be a bad skiing accident where you blow out your knee or a bad kidney stone that sends you to the emergency room in the middle of the night. You may fall on your way out to the car one morning and end up with a serious concussion and stitches. All of these things have happened to people I’ve known when they are in their twenties. Health insurance has protected these people from walking out of the hospital with thirty thousand dollars or more in debt.
Suppose you want to lower the cost of your health insurance by switching to a high deductible health insurance plan and put away money into a health savings account (HSA) each month. This strategy lets you save money overall, and you cover the occasional doctor’s visit out of your HSA. It also protects you if that disaster does strike unexpectedly. You do not want to be fighting with the hospital when you need an emergency procedure done.
Figure Things Will Work Out Okay
It is naïve to think that things will just magically work out for you. If you do not come up with a solid plan to purchase a house and follow a budget, nothing will change. You will be in the same place or worse off next year at this time, if you do not create a solid plan and follow a written budget each month.
It takes planning to move on to the next step. You need to prepare to do the things you want to. Your budget is the way you can get control of your finances. It allows you to determine when and how you spend your money. It is important to realize that budget isn’t a bad word, and that your financial plan will help you reach your goals.
Rely on Your Credit Cards to Get By
If you do this once or twice, you may be able to get out of debt pretty quickly, but if you make this a habit, you are going to wrack up a lot of debt in a short period, and you will not even have anything to show for it at the end of the year. Emergencies can come up unexpectedly, so you should save up an emergency fund so that you do not need to use your credit cards for emergencies. You need to make a goal to stop using credit cards completely for the next year. If you do use them, then pay them off in full at the end of each month. Using credit as a crutch is just one of the credit mistakes you can make.
Put Off Saving For Retirement Until …
You should be making regular contributions to retirement. You do not want to put it off until you buy a home or are completely out of debt. You may not be contributing the full 15% experts recommend you should work towards while you are trying to get out of debt, but you should still be making contributions now.
When you are in your twenties, you have a long way until retirement, and the more you contribute now, the more that money can help you. It is has a longer period to grow and benefit you. You need to make sure you are making regular contributions to your retirement account. If you do not qualify for a 401(k), you need to set up an IRA.
Giving Into Pressure to Take the Next Big Step
So many of life’s milestones will affect your finances. When you decide to get married, move for a career change, buy a house, or start a family, you should be ready for the changes they bring to your life. You are the only one that can decide when the time is right to make those decisions.
Your parents or friends may pressure you to make other decisions or to rush you into something before you are totally ready. If you are not ready yet, you may regret the choices that you made, and resent whatever step you took. Planning now for these events will make it easier to take the steps when you are ready, but you should decide when that is.