Welcome to the Top 5 Money Mistakes Webinar
Today we’ll discuss Money Mistakes plus Simple Do’s and Don’ts that make a big difference. The world of finances can be tricky, everyone makes mistakes. It happens, but it can lead to problems, and these problems can escalate if you don’t correct them. So we’re here to provide information to help you avoid making these common mistakes.
Mistake # 1: Living Beyond Your Means
Do you suffer from FOMO – “Fear of Missing Out”
Are you trying to keep up with your friends?
Or “PMS” – Poor Me Syndrome?
Are you are living beyond your means?
Do you carry high credit card balances or are your cards maxed out?
Are you saving less than 5% or have no savings at all?
Can you pay the bills on time?
Is your credit score below 600?
Do you have money left at the end of the month?
Some people feel as though they need to spend every last cent they have. There is this need to “keep up” with everyone else, but if your pockets can’t afford it, then you shouldn’t do it.
According to fidelity.com the secret to achieving financial goals is by saving money, but that can’t happen if you’re spending every penny you make.
According to other studies Americans spend $1.30 for every $1.00 they earn, so we are overspending already.
There is the 50/15/5 rule and this could be used as starting point for a budget or spending plan. This is where 50% of your take home pay would be for essential expenses, such as housing, food, utilities and other regular obligations.
15% would be used for retirement and 5% to short term savings. The rest – is left over to spend or save as you like.
A few ways to know that you are living beyond your means are:
- If you are carry high credit card balance and cards are maxed out. If your saving less than 5% savings. If you can’t pay your bills on time. If your credit score below 600. And you have no money left at the end of the month this means trouble.
Our next Common Money Mistakes is having No Emergency Savings.
In March 2018, the U.S. household personal savings rate was just 3.1%, according to Federal Reserve.
Many households live paycheck to paycheck, and an unforeseen problem can easily become a disaster if you are not prepared.
The result of overspending, puts people into a precarious position – one in which they need every dime they earn and one missed paycheck would be disastrous. This is not the position you want to find yourself in – if or – when an economic recession hits.
Well over half of Americans admit they would be unable to handle an unexpected expense, such as a medical bill or car repair, if it was outside their regular budget.
Being unprepared for a financial emergency can cause additional problems, such as going into debt to fund an immediate expense.
Try to set aside at least 3 to 6 months of living expenses in a savings account to tide you over during unanticipated tough times. And make sure you have all the insurance you need: health and disability insurance for unexpected medical issues, car insurance for accidents, homeowners or renters insurance to cover your home and belongings, and life insurance if you have dependents.
Our next common Money Mistake is Not Having a Budget…
Not keeping track of what’s coming in and what’s going out each month can lead to stress and many sleepless nights, not to mention financial disaster.
Creating a personal budget is easier than you think and can give you deep insight into where you’re at financially and where you could go.
I recommend using a spreadsheet to create expense and income columns to get a running total of your expenses that you can update when necessary.
Now we will talk about how to create a step-by-step budget.
First Create a List of Expenses
Start with the bare necessities. When creating a personal budget, it is best to start by making a list of necessities that you have to pay each month. This includes: mortgage or rent, utilities such as gas, electric, water/sewer, public transportation, medical expenses and groceries.
For the most part those are the only necessities. Figure out how much you’re paying over 12 months for each, and get a cost average per month.
Next on the list are things that give you security and peace of mind like health, life, auto, and home or rent insurance.
After that there are things that include items that people want, but don’t really need. If you’re expenses exceed your income, this is the place to cut back things like internet access, cable or satellite television, a phone, and auto lease or loan.
Step 2 is to Create a List of Income
The important thing here is to make sure that you list only take-home income – not your pre-tax salary. For those who are self-employed, consider averaging what you make over a year.
Next is Step 3 – Evaluate your Net Income or Loss
Take your income and subtract your expenses. If you have a positive number, you are doing better than many. Take your extra money and put it into a Roth IRA or retirement vehicle.
If you max out a Roth IRA, invest the rest in mutual funds. If you’re in the red, you’ll have some work to do.
Step 4 is to Prioritize and Re-balance
The great thing about a personal budget is that it opens your eyes to where you can cut back in to free up more cash. For instance, get 3 quotes on each of your insurances once per year to evaluate if you could be saving by switching. If you are in the red, consider where you can cut back.
Common Money Mistake #4 is having too Much Credit Card Debt.
Too much credit card debt is a sign that you are making some mistakes.
If you have a hard time controlling your spending, you’re going to want to leave your credit cards at home. Having high balances or maxing out your cards is a sign that your use of credit is out of control.
Stop using the cards and create that budget to get those balances paid off. Paying the minimum each month is not designed to get you out of debt. Every month that you only pay the minimum means you are carry a balance. The credit card company is charging you interest and making money off of you. When your debt load is high, make the highest payment that you can afford to pay off the debt fast.
If you find yourself relying on credit cards for essentials or to cover expenses on a regular basis, it’s time to review your spending and beef up your emergency fund. Depending on credit means you’re spending more than you earn.
Slide 8: Credit is used for practically everything, from getting a mortgage, a new car, renting an apartment to getting employment.
So if you let your bills get past due that will affect your credit. It is wise to check your credit and make sure the information is accurate. If you abuse your credit privileges it can haunt you for many years.
Common Money Mistake #5 is Not Planning for the Future
We tend to place a higher value on short-term rather than long-term benefits, even when we know the long-term is more important.
Putting off savings for your future is a common problem.
If you do not get your money working for you in the market or through other income-producing investments, you cannot stop working – ever.
Making monthly contributions to designated retirement accounts is essential for a comfortable retirement.
Take advantage of tax-deferred retirement accounts and/or your employer-sponsored plan. Your financial future depends on what is going on right now.
Many people spend countless hours watching TV or scrolling through social media, but setting aside two hours a week for your finances is more important!
You need to know where you are — to know where you are going.
Make spending time planning your finances a priority.
So the image on your screen now shows a person reaching their hands out, but the proverbial money tree is just out of grasp.
So close, yet so far.
If this how you feel before payday, then you are doing something wrong. Where is all of your money going? If it is all going to bills – then you have way too many to handle. If that’s the case then get help. This is imperative if you want to get out the cycle.
If all of your money is gone and it’s not to rent or mortgage, transportation and bills, then there is a big problem. If you can’t figure out where it all went and what you spent it on, then that means you need to sit down and work on a budget and spending plan.
To recap the 5 Money Mistakes often made are 1. Living beyond your means. 2. Having no emergency savings. 3. Not having a budget. 4. Having too much Credit Card Debt. 5. Not planning for the future.
The Bottom Line is you much think carefully before taking on new debts. Keep in mind that being able to make a payment isn’t the same as being able to afford the purchase.
Don’t bury your head in the sand because you refuse to admit that something is true and that there is a problem. It will not go away on its own, but with time, effort and discipline, it can be fixed.
Always remember – This is not an overnight process! Changing behaviors and habits don’t happen right away – it takes a conscious effort.
Thank you for attending the Top 5 Money Mistakes webinar and we hope that you will check out our other live and on demand webinars.