1. No Emergency Savings Fund
It is recommended that a person have six months’ worth of income in an emergency savings fund. The key to an emergency account, is to only use it for a true emergency. This money should not be used for a spur of the moment shopping trip or a weekend getaway. An emergency fund can help ease the financial burden if you lose an income source or have a sudden change in finances. Keep in mind, if you experience a significant change in income, adjust your emergency savings fund appropriately.
2. Dismiss the Importance of Credit Score
Your credit score and credit report reflects your ability to handle finances over time. These reports can impact purchases in your future, such as a car or house loan. To keep a good handle on your credit score, consistently pay your credit card and other debt payments on time each month. Be sure to check your credit score and credit report periodically and dispute any mistakes you may come across.
3. Not Saving for Retirement
Often people do not start thinking about retirement until they are close to ending their working career. It can be easy to put off retirement savings until later in life, but starting at a younger age is key to being adequately prepared. Saving while you have money coming in, can help you be able to enjoy your time during retirement.
4. Lack of a Debt Plan
Credit cards, if not managed correctly, make it easy to fall into a cycle of debt. Establishing a solid plan to avoid or get out of credit card debt can help you take control of the debt cycle. Make sure that you do not spend more than you earn; this is a good way to keep from relying on credit cards for everyday expenses. Once you create a plan to avoid or get out of credit card debt, stick to it. Decide ahead of time how much each month you are going to put toward your debt, and follow through. Paying more than the minimum payment helps you decrease your credit card debt quicker.
5. Do Not Have a Budget
Establishing a budget can greatly improve your financial situation. A 50/20/30 rule is suggested for a budget; 50 % of your income should be essential expenses, financial priorities should make up 20%, and 30% is left for lifestyle choices. Sticking to a budget helps keep you on track and avoid making money mistakes.
To help keep a good handle on your finances, avoid the common money mistakes listed above. Financially preparing for the future can help set yourself up for financial success down the road. For help establishing a game plan to work toward achieving your financial goals, contact the team of financial experts in St. Louis.