Personal Finance Advice

Most people don’t get through their adulthood without having made at least a few mistakes with their money. Whether you have made a few small blunders, like paying too much for a car or forgetting a payment date or two, or if you have had serious money problems that have huge consequences, like bankruptcy or foreclosure, the root cause is usually the same: You didn’t do your research, and you didn’t stay on top of your money.

Most people learn from their financial mistakes. It usually only takes one or two insufficient funds fees to whip people into shape with keeping up with their checkbook register, and people who pay too much for a major expense usually realize it after the fact and promise themselves that they will be more aggressive about getting a good price the next time they go to make a major purchase. What about the mistakes you may not realize you are making?

There are 5 money mistakes that plenty of people make, but do not realize that they can lead to big financial problems. Do any of these look familiar to you?

1. You use a credit card for everything. It’s really easy to use a credit card for purchases, and if you have a rewards program attached to your spending you might think that using your card to pay for everything is a roundabout way to earn something extra. The truth is that you probably spend a lot more when you use a credit card, so if you use your card to make all your purchases then there is a good chance that you are spending a lot more than you should. This is a doubly dangerous situation if you don’t pay your balance off in full every month.

2. You don’t save any money. You know that you’re supposed to save money, but with bills and day to day expenses sometimes saving gets lost in the shuffle. The simple fact, however, is that you just can’t skip saving. What happens to you if suddenly all your credit limits get slashed and then you have a financial emergency? If you don’t have any savings at all, you will be facing huge financial problems.

3. You don’t pay attention to your finances. If you mindlessly pay your bills every month without paying any attention to balances, fees and other aspects of your money, you aren’t getting the whole picture. How can you effectively manage your money if you have no idea what’s happening with it and where it is all going?

4. You don’t have sufficient insurance coverage. All it takes is one medical emergency or one automobile collision to really throw your finances into disarray. Insurance can be an annoying expense, especially if you have never had to make a claim before. You will certainly realize the benefit of paying those monthly premiums when you actually do have to make a claim, though.  

5. You don’t think identity theft can happen to you. Do you toss your credit card statements into the recycle bin with no thought of shredding them? Do you write your PIN on the back of your debit card? You might think that identity theft is an abstract concept, unlikely to affect you. What you need to realize is that you have to be vigilant about protecting your personal information, otherwise you may find some accounts opened in your name or your own account wiped out.

Managing your money doesn’t have to be complicated, but it does take some planning and common sense. Don’t make these potentially devastating financial mistakes.