Everybody makes money blunders from time to time, so if you’ve had a few financial regrets, you’re not alone.
Some blunders that experts say you can easily avoid, even though they are debatably subjective – you might regret having so much debt from student loans, but that degree was required to establish your profession.
Here are five frequent financial blunders and preventative measures you may take.
1. Not having an emergency fund
If 2020 taught us anything about money, it’s the value of having an emergency fund to draw on in the event of unforeseeable catastrophes like a job loss or unexpected medical expenses. If you don’t have any additional money left away, you must employ pricey methods of financing your life. This can involve using payday loans frequently, taking out cash advances, or accruing high-interest credit card debt. Lenders use your credit score to determine how much credit to extend to you and what interest rate to impose. It’s possible that you won’t get the best rates if your score is low.
2. Paying off the wrong debt first
While it can be challenging, financial gurus advise you to exercise prudence when choosing which debts to pay off. Before beginning to develop your debt repayment strategy, write down your amounts and related interest rates. Welch advises beginning with the debt with the highest interest rate, before moving on to debt with a lower interest rate.
3. Missing out on employer-matching contributions
This is a typical financial error that younger people commit. Make sure you contribute at least up to that amount if your business offers a 401(k) match programme to benefit from it entirely. By allowing you to make pre-tax contributions out of each paycheck, employer-sponsored retirement savings accounts can provide tax benefits to assist you in funding your retirement.
4. Not having credit monitoring or an alert service set up
“Opening an account in your name, committing identity theft, or charging something to your account unlawfully is as simple to do now as they have ever been. Even though credit freezes can help you protect yourself, the quickest way to spot any fraudulent activity in your name is to sign up for a credit monitoring service, which performs the legwork and promptly warns you of any potential risks.
5. Allowing ‘lifestyle creep’ to occur
It’s not uncommon to find yourself indulging more frequently than before when your money rises, sometimes known as “existence creep. When you have the money, prioritise your short- and long-term financial goals first rather than splurging on pricey new items.” It is much simpler not to realise what you are missing if you have never experienced money.