2020 was a year with many surprises and disappointments, especially in the financial portion of our lives. You may have been wondering how to avoid the money mistakes of last year, or even what those mistakes were. We’ve compiled the most common money mistakes into this article for you, so that you know exactly what money mistakes to avoid.
It’s always a good idea to set aside a certain amount of your monthly earnings to contribute to an emergency fund. This fund should only be dipped into for emergencies like accidents or when rent can’t otherwise be paid on time. Suddenly seeing something (unnecessary) that you want to buy but having no budget for it is not an emergency!
Investing gives you the opportunity to help your money make more money. Interest rates on money saved in a bank account, even in fixed deposits, are far less than money that’s been invested. Investing is a great idea for money that you’re sure you won’t need for at least 5-10 years, but don’t get the wrong idea – you don’t need thousands of dollars to invest. Even small amounts will benefit the future you.
Life insurance ensures that your dependents will be looked after if you pass away. If you have dependents (like children, old parents, or a spouse) that will not be able to earn (sufficient) income for a pretty long time should you pass away, then life insurance is a great idea.
It provides you peace of mind, and the amount of money you need to pay for it can vary greatly. Some life insurance providers require very small amounts, so be sure to shop around.
This is one of the most common money mistakes out there that you may be surprised people make. You should definitely treat yourself and spend on self-care, but if you’re buying candles and bath bombs before you pay your bills and rent, then it’s probably a sign that you’re not budgeting, or at least not budgeting right. Set aside money for your utilities and rent, then for food, transport, and any other necessities, and only then set aside some money for entertainment and save or invest the rest.
Credit cards are a great way to make sure that you can pay for the occasional large purchase or when you’re in a financial pinch, but it can also be tempting to use for everyday purchases. If you have a rewards card and are using your credit card even though you have the cash to pay for your purchase because you want these extra benefits/perks, then that’s fine. However, you must be mindful of using your card to spend money you may not have, especially if there are any unforeseen emergencies. Also, make sure you pay your credit card in full each month to avoid the cost that comes with paying only the minimum monthly balance.
We hope this article was helpful! Do you have any other financial habits that you’ve built to keep your finances healthy?