Mistakes are a part of every learning curve. When you are trying to save money, there are many mistakes you might unknowingly make which could hinder your progress. This can make it extra hard to save money, especially if you’re on a low income.
So, if you want to ensure you’re saving correctly and getting the most from your hard-earned cash, there are a few things need to avoid.
Here are some of the most common money-saving mistakes and how they can be avoided.
Check out the article on the 8 smart personal finance tips.
1. Not Setting Up Automatic Savings
When you first plan to save money, your motivation ensures that you keep making regular payments into your account. However, after a while, it’s easy to fall into the “I’ll save double next month” trap.
There will always be reasons to put off saving. Whether it’s an unexpected bill or you want the occasional treat, you’ll always find something else to spend your savings on. It’s common to view savings as a luxury more than a necessity.
So, to make sure you stick to your savings plan, it’s important to set up automatic savings. It is better to save first and then spend the rest of your income. That way, the savings will be taken automatically from your account before you’ve had a chance to think about it.
2. Saving Money Instead of Paying Off Debts
While savings are undoubtedly important, it’s more important to focus on paying off any debts you currently have. Your priority should be to close off all your debts and save money on the interest payments. This applies to all kinds of debt including credit card debt, mortgages, loans, etc.
Once you have paid off your first debt, use the extra money saved on its payments to pay off the next debt and so on. It is not a good idea to invest or save when you are already drowning in debt.
3. Keeping Savings in the Same Account as Earnings
Do you use a separate savings account? If not, you’ll want to open one. The trouble with keeping your savings in your personal account is that you’ll be tempted to spend them. Your brain will be inclined to see all the amount in your spending account as available funds.
It makes it a lot more difficult to keep track of savings when there are other incomings and outgoings into the account. Most personal accounts do not offer any interest income no matter how huge your deposits are. You might also consider some investment options like REITs (real estate investment trusts) or dividend-yielding stocks, etc. to improve your chances of passive income.
4. Impulse Buying
This is one of the major money-saving mistakes you need to avoid. Impulse buying is a major problem when you’re trying to save. If you tend to spend money on things you don’t necessarily need and you weren’t planning on buying, you may need to get your impulse spending under control.
Start asking yourself whether you really need to make the purchase. If not, place the money you would have spent into savings instead.
A good idea here would be to get into the practice of delaying all your non-essential purchases by a week.
Even after a week if you feel the same about purchasing something, you may go ahead with it. In most cases, you will lose interest within a few days and this purchase will no longer be a priority in your life.
5. Placing Yourself on a Spending Ban
It might seem like a good idea to place a spending ban on yourself. However, this can actually hinder your savings progress. When you feel restricted, it can tempt you into going on a spending spree – a little like when you’re trying to stick to a diet that cuts out your favorite foods. You’re going to cheat if you feel restricted, so try not to place a strict spending ban on yourself.
Make it a thumb rule to spend only on the good stuff and the things that make you happy, not something that can give you momentary pleasure. Putting yourself on a complete spending ban is only going to worsen your money-saving mistakes.
6. Not Having a Budget Tracker
A budget tracker is not just for listing down your expenses. It can give you a bird’ eye view of how your money has been spent and how you can make adjustments to make it better. Without a budget planning tool, you will be completely lost as to where your money is going every month.
Needless to say, most people have the problem of wondering where their money went every month. With a budget tracker, you have the answer to this complicated (or not so complicated) question.
These are some of the most common money-saving mistakes you need to avoid if you wish to get your finances in order. Make sure you follow all these critical tips to take control of your earnings.