5 Money Mistakes to Avoid
Mistakes are a part of life. If we didn’t make mistakes, we would never learn. The key is not making the same mistakes over and over again, but rather to learn from them and make better choices next time.
Mistake #1: Carrying a Credit Card Balance:
Credit is a part of life. Without solid credit, you can’t get a mortgage, which would rule out owning a home for most of us. The challenge is managing credit properly. It is very tempting to see credit as money you have at your disposal, but if you don’t have enough cash to pay off your credit card in full when the bill comes, you will be paying the credit card company a pretty penny to carry a balance to the next month. Most credit card companies charge between 10-20% in interest. Carrying just $1,000 on your card for just six months will cost you $60. This may not seem like a lot but over time this adds up. Wouldn’t you rather spend that money on something you enjoy?
Mistake #2 – Keeping Up With the Jones
We’ve all done it. You come home from work one day and see your neighbour has purchased a brand new car and the little green jealousy monster inside you says, “How come they get a brand new car and I’m still driving this hunk of junk?” Trying to keep up with others is a recipe for disaster. Chances are you don’t know the inner workings of how your friends’ or neighbours’ finances work. Maybe they have income that you aren’t aware of or are digging themselves into a financial pit with no hope of recovery. The point is putting yourself in debt just to keep up will only create a big mess.
Mistake #3 – Paying Bank Fees Late Fees or NSF Fees Unnecessarily
It used to be that bank fees were simply a fact of life, but with competition increasing, banking fees are starting to disappear. Many banks and credit unions now offer free chequing accounts with no transaction limits. Paying simply to have a chequing account doesn’t make sense anymore. What makes even less sense is paying late fees or NSF charges. A typical NSF fee can range anywhere from $15.00 to $50.00, which, with a little bit of planning, can be avoided all together. Try working with a money calendar so you know when money is coming in and due to go out.
Mistake #4 – Not Having Insurance
Insurance is not a fun subject to talk about, and like credit, the best time to get insurance is when you don’t need it. Especially because personal insurance is something that only gets more expensive as you age. Talk to a financial professional about disability insurance and if you have kids, life insurance. Make sure you understand the details of the contract and get more than one opinion. Spending money on insurance you don’t need is just as bad as not having it at all.
Mistake #5 – Spending More Than You Earn
This may seem like a no brainer, but it is by far the most common money mistake we come across. The first step to not spending more than you earn is understanding how much you earn. If you have a base salary of $50,000 that doesn’t mean that $50,000 goes into your pocket every year. There are taxes, as well as CPP and EI, that get deducted from your paycheque. If you work on commission or tips, then start writing down how much you bring in: you may think you earn more than you do. After you know what comes in the door, you have to get a grip on what goes out. This means writing down every time you spend money. There are some great tracking apps out there, so do some research on what will work for you. The bottom line is what goes out cannot be more than what comes in.