While some people are great at saving money, others cannot save a dime. The better savers are often those who make less money too. Clearly, part of saving money is avoiding mistakes: Here are some common ones people make.
Not only can one never be too young to start saving for retirement, starting young is the best way to go. With compounded interest, a dollar saved at 20 will be worth far more than one saved at 40 when retirement age comes around. Furthermore, the best retirement vehicles such as Roth IRAs have yearly limits. Start putting some money away every year and forget about it as much as possible until retirement.
Not preparing a safety net
There is no telling when one might find themselves in a pinch and need extra money. Those who have not prepared for this day invariably end up being forced into courses of action that are more costly. Being prepared saves in both money and heartache.
For most, the temptation to spend what could be saved is just too great without a budget. Therefore, it is paramount to have a budget that keeps spending below income. Set goals that are tough but realistic and make it a habit to stick to them.
Carrying credit card balances forward
For those who think they cannot pay their credit card in full every month, think of this: If it is impossible to pay for something without paying interest, why should it be possible to pay for it with interest? If the money is not there to pay for something by the end of the month, then delay purchase until it will be. There is no sense, either logical or monetary, in adding a credit premium to the price of goods.
Not thinking long term
Many people pass of considerable savings on things like memberships or energy-saving appliances because they do not think long term. Thinking longer term can add up to huge savings for a lot of things. Keep the savings that will come in mind and not of the pain of paying more now when the opportunities long-term savings arise.
Putting too much into vehicles
Vehicles should be thought of as a means of transportation and not toys. It is easy to become a slave to them and let them eat up huge resources that should be set aside for retirement and the like. Keep things as cheap as possible by going with used, smaller and simpler cars that will cost a lot less to buy as well as maintain and not suck up so much in depreciation expense.
Not taking care of one’s health
Just as everyone knows that properly maintaining equipment such as cars saves money by making them last longer, preventative health care saves in medical expenses. Everything from proper dental care to exercise can greatly reduce sky-high health costs. Good health also reduces the amount wages lost to being sick. Keep in mind that health expenses are the fastest and the most agonizing way to see one’s savings go.
Taking out too much insurance
When offered insurance, remember that insurance companies are designed to make money. The odds are that one will lose on things like extended warrantees and other types of insurance over the long run.
Not getting the family onboard
Financial responsibility can make or break a family. The family member that is best with finances should be responsible for the money and of educating the rest of the family in being responsible too. This can save money and even prevent a costly breakup!
Missing the best prices
The best price for products can often be found with a quick online search. Before buying anything, one should do a search to make sure they are getting a good price. This will add up to huge savings over time and potentially cut out impulse buying that one might regret later.
Pass up investment income with overly safe investments
There are times that one needs to be very conservative with their investments. However, anyone investing money they are unlikely to need for the shorter term should be taking greater risks. Very safe investments such as savings accounts often lose money over time when inflation is factored in. Responsible, diversified investments in stocks and the like will pay much more over the long term.
Neglect common sense and restraint
A lot of the best ways to save money simply comes down to common sense and self restraint. Bad habits such as smoking and abusing substances are obviously going to incur huge expenses over time. Buying too many things will complicate one’s life while draining the pocketbook. For those who have slipped into bad and destructive habits they cannot break, the best way to save money in the long run may be to invest in professional help sooner rather than later.
With much of what it takes to save money coming down to what one must not do, it is important to think about what to avoid when building up that nest egg.