Graduation is an exciting time. You’re out of school, independent and have your first real job. However, it is your first paycheck that brings about the real excitement. Unfortunately, for most people, this excitement is short lived. As soon as they get their paycheck, most people start shopping for their apartment or dining out each day. In a few weeks, all the money evaporates into thin air and they’re left stranded until the next payday.
Most, if not all of us, are guilty of spending inappropriately. We hurt our finances by overspending on shopping, eating out, and other unimportant expenses. Also, most of us seldom try to look around for cheaper deals as we consider it a ‘waste of time’. Knowing how to balance your desires with the list of financial responsibilities and obligations is crucial. This is a fundamental money management practice that each one of us has to learn and remember. No matter how hard you try, completely avoiding money mistakes is simply not possible. However, by learning the basics of money management and avoiding the common spending mistakes, you’ll be able to save some money and better your finances. Following are some common spending mistakes that credit counselors want you to avoid.
Spending every penny
The key to financial success is simply saving money. For this reason, you must avoid spending every penny that you earn each month. Generally, the lack of motivation or having nothing to save for is the reason some people don’t save. If you’re one of them then you must use your dreams to motivate yourself for saving. If buying a home or owning a Maserati is your dream then you must motivate yourself to save enough money to fulfill your dream in 3, 5 or 10 years time.
Contrary to what you may think, there are several opportunities for you to cut back on expenses. For example, instead of spending money on lunch at work, you can make a sandwich at home to save money. To cut monthly expenses, you need to find out how much you earn and how much you spend each month. A saving strategy that works for most people is the 50/15/5 rule. This means that you 50% of your income on expenses should be reserved for expenses, 15% to go to retirement savings and 5% should be your short-term savings. You can spend the remaining 30% as you deem fit.
Excessive use of the credit card
Remember: if you cannot pay for something with cash then you probably can’t afford it. It’s a proven fact that people who pay with credit spend more than those who use cash to make purchases. Use your debit card if carrying cash is a problem for you. If you don’t have a debit card, use only one credit card and keep track of your purchases with it. Don’t fall for the discounts on credit card purchase. Even if you pay less for the an item with the credit card, the interest on your monthly credit card bill eat up most if not all of what you saved.
The aforementioned spending mistakes are just two of the countless spending mistakes that most of us make. To find out about the other spending mistakes, get in touch with a credit counselor.