5 Big Financial Savings Areas to Consider

Have you ever heard someone say that experience is the best teacher? Here’s another one–there are no mistakes, just lessons.

Well, I would like to take a slightly different tack. Experience isn’t the best teacher. Someone else’s experience is. Learn from other peoples’ mistakes and you can save yourself a lot of grief.

In that spirit, I’d like to review the biggest financial mistakes I’ve seen and offer you ways to avoid them.

1.Living paycheck to paycheck

Too many Americans don’t have enough money in savings. According to CareerBuilder, nearly 80% of Americans live paycheck to paycheck to make ends meet. If you think this only applies to those who are in low-wage positions, nearly one in ten workers who earn over $100,000 or more are in the same boat.

During the recent government closure, we were treated to story after story from federal employees who were running out of money after missing one or two paychecks. And these employees were guaranteed back pay and were offered plenty of assistance from banks, food banks and credit unions!

I’m not trying to minimize the frustration many of them experienced, but imagine what might happen during an extended period of unemployment.

Don’t wait to start socking money away. Pay yourself by stashing away funds after each pay period. I would recommend at least three to six months of emergency funds. I’d lean towards six months. Financial insolvency is among the leading causes of stress.

2. You can’t start too early saving for retirement

We all know the reason earlier is better–it’s the magic of compounding. Those deposits made in our 20s will have a lifetime to grow. The longer you put off the savings, the less time your money has to grow.  Don’t waste the chance to increase your savings now. You’ll never get it back.

3. Do you know where your money goes?

Without a spending plan that tracks expenditures, you may wonder why there is month at the end of your money, and not money at the end of your month.

Focus on the essentials–rent, mortgage, utilities. Leave room for your financial goals–repaying debts, retirement, emergency funds. And have some fun by budgeting for lifestyle choices–recreation, hobbies, vacation, and so forth. 

If you are unsure how you might get started, my team can help you develop a spending plan that will help get your financial house in order.

4. Credit cards and personal debt 

Credit cards are a wonderful convenience and most pay some type of reward. But don’t place yourself in bondage to monthly payments. Pay them off monthly or suffer from steep interest charges.

5. Luxury purchases

That new car sure is fast, the ride is exceedingly quiet, and it has all the latest gadgets. But the new car smell will eventually wear off. The payments, however, won’t. When looking for a new vehicle, what you don’t know can hurt you. What is the gas mileage? Does is require an expensive grade of gasoline? What will it cost to insure? And what will the annual license renewal run?

If you can answer these questions and the payments comfortably fit into your budget, you’ll sidestep any surprises that could crowd out your hobbies and financial goals.