When it comes to dieting and budgeting, it’s amazing how similar the advice is for both, based upon simple inflow and outflow principles. For example, how many times have we heard, “burn more calories than you consume,” or “spend less than you make?”
Both concepts sound very simple, but most people struggle to execute them. It’s like the old saying goes, “it may be simple, but it’s not easy.”
But is managing finances really as easy as it seems? Research shows most consumers don’t know as much about money as they think they do.
A GuideVine study found many Americans are actually pretty clueless about basic financial concepts such as inflation works, interest or bankruptcy. And, the most common mistake respondents admitted to making was not saving enough money.
Sometimes despite our best financial planning efforts, we stumble. Here are a few financial mistakes that may cost you in the long run.
Not Tracking Funds
If you don’t know where your money is going, there’s no way you can prioritize spending, let alone set savings goals or figure out a budget. If you track where you spend every single dollar for one month, you may be shocked to learn where your hard earned money goes.
Waiting to invest
Every little bit helps when it comes to having your money work for you to build wealth. Make the most of tax-deferred retirement accounts and/or employer-sponsored plans. If you are unsure about investments, speak to a financial adviser who can walk you through the basics of risk and how you can put the right mix of risk and yield to fit your goals and investment style.
Relying on credit cards to live
Just because you can make the minimum payments on your credit card statement, it doesn’t mean you can afford your lifestyle. You don’t have to pay your balance in full every month, but if you are carrying debt on credit cards, make sure you have a plan to pay them off because interest adds up. For example, if you charge a pair of $300 designer sunglasses to your credit card, if that card charges interest at an annual rate of 18% (APR means annual percentage rate), you’re paying an extra $54 per year. Carry that balance for 10 years without making any progress toward paying down the principal, and your $300 sunglasses could actually cost you $840.