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Are you jeopardizing your financial future without even realizing it? Most people don’t wake up every morning thinking of all the bad financial moves they make each day. However, the sad fact is that for many, bad money decisions have left them deeper in debt and limited their options. It doesn’t have to be that way, though. Here are five ways many people sabotage their finances, and some great advice that can help you stop doing so.
1. You Don’t Budget Money
Do you know where all your money goes? Do you have a plan to cover all your monthly bills, save for the future, and prepare for tax season? Unfortunately, fewer than half of all Americans have a budget to guide their spending, investing, and saving decisions. If you fail to make a plan for using your money, there’s a good chance you’ll miss fleeting opportunities, or even fall into financial peril by overextending yourself. Fortunately, correcting this problem is easy; simply set a realistic budget that enables you to make the best use of the money you earn, and reconcile that budget regularly. This will help keep your finances on track, so you put your hard-earned money to work for you.
2. You Rely upon Credit Cards Too Much
Are you carrying a high balance on your credit cards from month to month? If you are, you’re not alone. The average American household is now carrying a monthly credit card balance of $16,000. That balance, and the interest expenses associated with it, leads to high monthly payments, and it makes it difficult for people to focus on other financial priorities. Credit card debt can also crowd out other bills and make it all but impossible to save for the future.
Getting out of credit card debt can be challenging, but there are options. For example, many people choose to combine all their credit card debt into a debt consolidation loan, to streamline debt repayment and make their debt more manageable. Many other people choose to use debt settlement services such as those offered at National Debt Relief to deal with debts that have ballooned out of control. Whichever method you decide to use, getting control of your credit card usage is a great way to stop sabotaging your financial future.
3. You Spend Too Much
Are you living beyond your means? Do you spend more on your lifestyle than your current income can afford? For many people, the answers to these questions are yes. Nearly 80% of working Americans currently live paycheck to paycheck. If you find yourself running out of money at the end of the month, relying upon credit cards to cover your bills, or you just dread checking all your account balances, then perhaps you should take some concrete actions to get your spending under control. A budget and efforts to control your debt should help improve your spending habits. Additionally, actions such as finding more affordable housing or limiting yourself to cash only when it comes to unplanned purchases can help you get your spending under control as well.
4. You Don’t Prepare for the Unexpected
What happens if your car breaks down tomorrow, or your furnace stops working? Will you be able to afford the repairs? Most people don’t prepare for the little emergencies that arise unexpectedly. In fact, only about 40% have $1,000 in the bank to deal with a minor crisis, and let’s face it; there’s no such thing as a “little emergency” if you don’t have the money on hand to address it.
Fortunately, preparing for the unexpected isn’t that difficult. Even if you don’t have that much cash on hand at the end of each month, you can accumulate small amounts of cash over time to build an emergency fund of $1,000 or so. Additionally, you should consider other means to mitigate risk as well. For example, insurance policies to cover your home, automobile, or business can help limit the risks incurred from unexpected events. Routine maintenance on your car and property can also help to ensure that an unforeseen event doesn’t leave you without any options.
5. You Don’t Plan for Retirement
When do you plan to retire, how much money will you need? Many never even bother to ask those questions, let alone look for answers, as a staggering 21% of people have no retirement savings at all. It’s no surprise that Americans are retiring later in life than they ever have before; many people simply cannot afford to stop working. The fix to this dilemma is very straightforward: start preparing for your retirement as soon as you can. If your employer offers some sort of retirement plan, such as a 401(k), ensure you start contributing to it. If you’re a business owner or self-employed, talk to a financial expert to determine the best retirement savings plan option for you. The sooner you begin saving for retirement, the faster your plan will build begin building value for you.
Whether through action or inaction, too many are sabotaging their finances and limiting the opportunities to live better, fuller lives. Fortunately, it isn’t difficult to recognize the money mistakes being made and take concrete steps to address them. Therefore, if you’re making any of the financial missteps noted here, start taking actions to get yourself back on track as soon as you can!