If you have ever wondered where your money goes each month, you are not alone. We all fall prey to spending more than we earn or any of the many other traps that keep us from getting ahead financially. There are, however, simple solutions that we can easily employ to get our finances under control.
Here are five of the most common bad habits Mission Viejo, California, residents all have fallen into at one time or another. Getting into them is easy, but it breaking them can be just as easy if we set our minds to it.
Allowing savings to become an afterthought
Many of us do not have a savings plan. Coming home at night and put your loose change into a glass jar is not an effective savings strategy. Building a nest-egg through savings does not occur haphazardly. It starts with setting a monthly savings goal and, if possible, arranging to have the money deducted directly from our paycheck.
Impulse shopping fueled by credit cards
Too many of us see something we want and buy it without giving any thought to whether we can afford it. Credit cards make it easy to buy something on the hope that we will be able to pay for it when the statement comes next month. A better plan of action might be to ask the following questions before committing to the purchase:
• Is this something that I really need?
• Could I get a better deal by shopping around for a better price?
• Will I save money by waiting until I can make the purchase without using a credit card?
Contributing to the profits earned by your bank
We allow banks to take money from us every month in the form of the fees they charge. Many of those fees are avoidable. Overdraft fees in 2015 can be avoided by keeping track of the checks you write and the balance in your account. You can avoid ATM fees charged for too many transactions each month by planning your banking to avoid excess usage.
Being house poor
Spending too much each month on your housing costs is a sure way to end up in financial trouble. Monthly housing costs should not exceed 28 percent of our gross income. We can reduce housing costs by filing a tax grievance to reduce real property taxes or by refinancing our mortgage to get a lower rate of interest.
Failing to take advantage of tax benefits our jobs offer us
Your employer’s 401(k) can be a painless way to save pre-tax dollars. Some companies offer employees health care and commuter saving plans that allow workers to put aside pre-tax dollars to be used for specific expenses authorized by federal tax laws.
Would you like to learn more about how you can save for the future? Call Bart Zandbergen CFP® for a free consultation, or visit our website.