Money. You work so hard to earn it, yet it seems to disappear so fast. Even if you’re adamant about putting money aside, you may find yourself dipping into it in the event of an emergency or an invitation for a night out that you just can’t say no to.
Managing money is not easy, and anyone can make money management mistakes. The key to being successful is knowing what the common mistakes are so that you can avoid them, ultimately keeping more money in your pocket.
Here are 6 of the most common money management mistakes you should avoid:
- You don’t have an emergency fund.
If this past year has taught us anything, it’s that emergencies do happen. In the event of a job loss or medical emergency, it is best to have 8 to 12 months’ worth of living expenses saved up to get you through difficult times. Many Canadians don’t have an emergency fund, and so when emergencies do happen, they find themselves relying on credit to get them by, ultimately landing them deep in debt. Aim to build up an emergency fund so that you can avoid relying on credit to manage your day-to-day expenses.
- You spend more money than you make.
If you love eating out at restaurants and splurging on a Grande cappuccino each day, these things can quicky add up. Oftentimes people don’t realize they’re actually spending way more than they make. By using things like credit cards to pay for daily expenses, it can be very easy to get out of hand and not have enough money to pay the bill at the end of the month. Carrying a balance on a credit card can add up to a lot of interest. Take time to track your expenses each month to see exactly where your money is going. It’s also a good idea to try living on a cash diet so that you can be sure you won’t spend more than you have.
- You don’t check your finances regularly.
If you’re the type of person who is scared to look at your bank account for fear of what you might see, then you may have a problem. Ignoring your financial woes and pleading ignorance is a surefire way to make your financial troubles get even worse. Don’t be afraid to tackle your finances head-on. If you need help because you’re overwhelmed by the debt, then seek help from a non-profit credit counsellor who can help you get back on track.
- You live like you’re wealthy.
Excessive borrowing is a major personal money management mistake. This may involve things such as taking out expensive car loans for cars you can’t really afford, or constantly using credit cards to fund your lifestyle. If you’re finding that you’re only paying the minimum amount on your debt each month, you will find yourself in debt for a very long time. Instead of borrowing and spending more, spend time creating and following a budget that clearly indicates how much money you have coming in and going out each month.
- You make poor investment choices.
You may be looking for a way to make big money fast. Unfortunately, get rich fast schemes only put you in further debt. Gambling your money away on something like Bitcoin or in a casino can have serious consequences. Only invest in high-risk ventures with money that you are prepared to lose. Simply put, if you want to make money, you have to save money – even when you are in debt. A credit counsellor can help you make a plan to save while still repaying your debts with the help of a smart budget.
- You lack the motivation to resolve your debt problem.
Many people have the intention of making a budget but then when they do, it collects dust and they never follow it. Creating a budget is not a one-time activity. You should be reviewing it regularly, along with your bank accounts and other debts and bills to ensure you’re staying on the right track. To avoid making these personal money management mistakes, you have to become disciplined.
Everyone makes these money mistakes from time to time. It’s easy to make these mistakes, but with hard work and determination – and a budget – you can avoid common financial pitfalls. If you’d like to get in touch with a credit counsellor who can help you discover where you’re making personal money management mistakes, contact Credit Counselling Services of Atlantic Canada today.