Creating and sticking to a budget isn’t always easy, but it’s worth the effort. Not only does it help you get and stay on track with your financial goals, but it can also reduce stress by decreasing decision fatigue and limiting financial anxiety.
Budgeting doesn’t have to be restrictive – it’s simply about being conscious of what you spend and prioritizing needs versus wants. For example, if you have a fixed expense like your rent or cell phone bill, you might need to cut back on other variable expenses like coffee shop visits or entertainment. However, if you really love your lattes and can’t imagine life without them, consider cutting back on other non-essential expenses or opting to pay in cash to reduce your spending.
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A budget is also a way to make sure you’re saving enough for emergencies or other financial milestones. Not having a savings goal is a big money mistake because it increases your risk of falling into debt or relying on credit cards for daily necessities.
Many Americans receive a tax refund every year, and it can be tempting to use that money for everyday expenses or unimportant purchases. Instead, use it to pad your emergency savings, pay down credit card debt or invest in retirement.
Financial mistakes can be a lot of work to overcome, especially when they’re compounded by other financial issues, like overspending, using credit cards or not saving for emergencies. But avoiding these common money mistakes can help you build healthy habits and avoid the financial stress that can lead to more long-term damage, such as unmanageable debt, bankruptcy and an insecure future. So what are you waiting for? Start tracking your expenses and building a budget today! You can find templates online, try out an app or check with your bank to see if they have a budgeting service.
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Not saving for emergencies
Many Americans struggle to build up enough savings to cover unexpected expenses. The conventional wisdom says to try to sock away enough cash to cover three to six months of expenses. But that number can feel intimidating, which may cause people to give up on the idea of having a healthy emergency fund.
A car breakdown, home repair bill or medical bills can all take a toll on your wallet. And while it’s impossible to predict what life will throw your way, you can plan ahead and make wise choices that will help you ride out the curveballs when they do arrive.
Careless spending is another financial mistake that can lead to financial trouble. It’s easy to dismiss $10 for an app that delivers food or $100 for a salon-quality haircut as nothing, but consistent, sporadic spending can add up quickly and leave you short of money at the end of the month. Instead, set a reasonable budget and work to stick to it.
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