Saving money on a daily basis is difficult enough. Trying to save money while making several money-saving mistakes makes saving even more difficult. When you know you want to start saving money, you need to first come up with a savings plan.
Going into it with a money-saving strategy will prevent you from making common mistakes that can set you back. The strategy you create should be tailored to your specific money-saving goals and situation. Keep in mind that not all people will have the same goals or savings plan, so it’s important to sit down and put thought into your own individual strategy.
Not sure where to begin?
First, it’s ideal to determine what mistakes you’ll want to avoid throughout the entire process. In the guide below, there are several money-saving mistakes you need to know about. Continue reading to learn more!
1. Saving Without a Realistic Goal
Before you begin mindlessly placing random amounts of money into a savings account, start with giving yourself realistic goals. One mistake people make when trying to save money is saving without realistic goals in mind. You need to not only have a 1-year, 5-year, or 10-year plan in effect, but you also need to be realistic with what goals are drawn out in the plan as well.
How much money do you want to save by a certain date? Then, determine what smaller steps will need to be made from now until that date to help you reach that goal. Is the goal realistic?
If you want to have $20,000 saved in one year and you break this down by months, then you’ll need to save about $1,667 each month to reach that goal. Is that a realistic goal for you? If not, don’t hesitate to make a few changes to your plan and goals to ensure they’re all realistically achievable.
2. Forgetting to Prioritize
Don’t forget to prioritize your saving as well. You should look at what debt you have that’s holding you back. Any debt with high-interest rates should be your first priority. Not only are these debts negatively affecting your credit score, but they’re also putting you in more debt each month as you’re being charged interest.
Start by placing a certain amount of extra money towards these debts, even if it’s only an extra $5 each month while still paying all other debt and bills. If you don’t have any high-interest debt, then you may want to prioritize retirement savings or an emergency fund.
3. Not Saving/Investing After Discounts
When you see a good deal in the stores, it’s difficult to fight the temptation. Everyone loves a good deal, but you must ask yourself, “was I going to buy that before I saw the discount.” Don’t spend money on items you wouldn’t normally purchase simply because they’re on sale.
If you find discounts or sales on items you were already going to buy (or if you use coupons), then you’ll want to consider placing that money into savings or investments. How much did you save in the store from the coupons or discounts? Take that amount of money you would have normally spent and place it into some form of savings account rather than keeping it in your pocket.
4. Buying Cheap Versus Smart
Although we might not want to spend money on a regular basis, there’s no denying that’s it’s a requirement. When you must purchase something for your home, office, or another necessity, don’t always go cheap. It’s better to buy smart rather than buy the cheapest product you can find.
However, this doesn’t mean the cheapest choice isn’t the best one. What it means is that you want to know as much about the product as possible to ensure you’ll get your money’s worth out of it. Look into the reviews, search for warranties, and compare prices.
It’s much better to spend an extra $10 on a microwave that’ll last you 15 years or more than saving that $10 only to need another new microwave in 5 years.
5. Failing to Create an Emergency Fund
When you think about money savings, you most likely think of a typical savings account or a retirement plan. Don’t fail to create an emergency fund. Creating an emergency fund is different than creating a regular savings account.
An emergency fund is an account you place money in only to be touched in case of an emergency. Your savings shouldn’t be touched until you reach whatever goal you set for yourself. An emergency savings account is put in place to give you a cushion if something were to ever happen.
For example, the air conditioning unit in your home suddenly stops working, and it’s going to cost you $1,500 to correct the issue. This is where your emergency funds come into play.
6. Placing All Money in a Savings Account
Another common mistake you want to avoid is placing all of your money into a savings account. Instead, you want to place your money into several accounts where it can build the most interest for you. Consider investing it or placing it in accounts with a higher interest rate than an average savings account.
Place the money you need access to in your emergency fund or savings account. The rest of the money should go into investments. Not to mention, when all of your money is easily accessible, it’s easier for you to withdraw it when it might not be necessary.
7. Looking Past Financial Advisors
Investing your money is a great way to start building it. If you’re going to invest your money, then make sure you know exactly what you’re doing. Don’t look past the advice of financial advisors.
There are plenty of different ways to invest your money, but what’s the right option for you? For example, there are mutual funds, exchange-traded funds, stocks, and more. Before investing in any of these, you’ll want to know all the details.
Read the fine print and if there’s something you don’t understand, seek the advice of a financial advisor. They can give you clarification and help you understand associated fees, requirements, and terms.
8. Not Giving Yourself a Budget
Starting a budget is essential if you want to save money. When you give yourself a budget to follow, you stop spending as much money each month. This money can then be used to build your savings.
If you continue to spend without a budget in mind, then it can be difficult to save money and reach your goals. Start by analyzing your income versus your expenses. How much money do you have leftover each month after paying all expenses?
How can you make adjustments to these expenses to increase the amount of money you have leftover each month? Start cutting back on expenses where possible.
9. Forgetting to Track All Spending
The only way to stay on top of your spending and your money is to track your spending. Tracking your spending can also give you clarity on where you spend money the most (especially necessary money). This can then help you when determining your budget.
Tracking your spending also allows you to hold yourself accountable. Are you following your budget? Where are you failing to meet your budget?
It’s a good idea to keep an eye out for any discrepancies in your account as well. If you notice anything unusual, then contact your bank as soon as possible to file a report.
10. Living Each Month Paycheck to Paycheck
If you want to save money, then you can’t live each month paycheck to paycheck. This leaves you with little to no money after all expenses are paid. If you’ve found yourself in this situation, then it might be time to get a second job or start a side hustle.
There are many great side hustle options out there to choose from, such as dog walking or sitting, babysitting, selling handmade products, and more. It’s beneficial to reduce your bills when possible also. Are you currently paying for something that’s not a necessity?
Cable, annual passes, and subscriptions are all unnecessary expenses. Now is the best time to cancel these expenses until you’re able to pay them while still reaching your savings goals. In the meantime, you can take all the money you’d normally spend on these expenses and place it towards your savings instead.
Another mistake people make is forcing themselves to live paycheck to paycheck when it’s not necessary. You want to save as quickly as possible, but you shouldn’t force yourself to live off close to nothing each month simply for the sake of saving. Allow yourself at least $100 per month as a buffer.
You can still live a good life on a budget as long as you plan correctly.
How Can You Recover From Your Money-Saving Mistakes?
Have you made a few of these money-saving mistakes and are now in the process of correcting them? Don’t be too hard on yourself. Many people make these common mistakes.
If you need money to pay bills or make an unexpected repair, then Credito is here to help. We can get you a fast and easy loan to help you get on your feet. After getting approved, you can then set up convenient payment options that work well for you.
Apply now and learn how to get the process started.