Successfully executing financial planning requires that you are not only proactive, but that you tread lightly and recognize mistakes-in-the-making that can potentially derail your goals. Some are insidious, others are obvious, but all are major. Here are five common mistakes that people make when it comes to their finances, and how you can avoid making them.
Recklessly Applying for Credit Cards
…Especially if you keep getting denied. Often, you’ll be coerced into applying for credit cards that you don’t need, and those which have sky-high interest rates. But what a lot of people are unaware of is that getting denied for a credit card actually reflects poorly on your credit score. And that means that being denied multiple times within a matter of weeks or months could seriously jeopardize your financial future. If you are denied credit, you may want to wait at least six months before applying for your next card.
Not Budgeting Yourself
If you aren’t properly keeping track of every nickel, dime, and dollar that you spend, it’s easy to lose track of how and where your money is being spent. Allocating money for things like groceries, gas, and recreational activities ensures that you don’t spend more than you need or want to, and it can make you more conscientious about your spending, and saving.
Not Saving Enough from Each Paycheck
Whether you’re saving for your first house, your tuition, or just building an in-case-of-emergency fund, saving money from paycheck to paycheck is essential, and something that can easily be budgeted for. While this one may seem obvious, you’d be surprised to know exactly how many people put off saving and don’t realize it until its too late.
Cosigning a Loan for an Unreliable Borrower
If the borrower defaults on their deal, your credit is on the line, and you’re essentially barred from taking out any future loans, getting approved for a credit card, and you’ll likely be denied many of the benefits that come as a result of a good credit score.
Filing Higher Than ‘0’ on Your Taxes
When it comes to your finances, it’s best to play the long-game. In the short-term, not having an exorbitant amount of tax money taken out of each paycheck may feel downright satisfying (what feels better than having money to blow?), when tax season arrives, you’ll lament a small return — or even the fact that you may now owe money to your state and federal government. By filing ‘0,’ and budgeting yourself throughout the year, that lump sum will not only feel well-earned, but is a great step towards building your savings.