Financial mistakes are so common, even the experts have admitted to making some of the most common financial mistakes themselves. Instead of attempting to be mistake-free, many people opt on limiting mistakes and eliminating the most common mistakes they make.
There are five mistakes that almost everyone, be them a novice starting their financial lives or a professional trained in financial advising, make with their money.
Missing Tax Breaks
The U.S. tax code is complex and hard to negotiate, even for some professional tax accountants. Every year, millions of dollars worth of tax breaks, credits, and deductions go unclaimed by filers. Part of the problem is a lack of knowledge about the tax break existing. The other part is the requirements to file which can be confusing to self-preparers.
This mistake can be avoided by hiring a professional tax accountant to prepare a tax filing, and a second accountant to perform a double-check before the following year’s filing. This can find hundreds of dollars that can still be claimed.
Spending Without Budgeting
A cup of coffee on your way to the office. The newspaper from the box on the corner. A pack of gum while waiting in line. We often remember major expenses, such as rent or mortgage, car payments, utility bills, and overlook our smaller spending habits.
A person can spend nearly $1300 on cups of coffee during a year. A smoker can spend almost $3,000 a year on cigarettes. These expenditures are often not budgeted. It’s also where most people spend a lot of money they don’t even realize. A dollar or two today can add up by the end of the year.
When budgeting, be sure to leave room for incidentals or find cheaper alternatives, such as quitting smoking or brewing coffee from home.
Using Credit Too Much
Credit cards are a part of the consumer culture in the United States. They are also one of the largest monthly expenses families face. With the average person spending over $500 per month on credit card payments, it is easy to see how people can get into financial trouble using credit cards.
Spending money to repay credit cards takes money away from other expenditures. It becomes part of a self-fulfilling prophecy that credit card debt leads to increased credit card spending. The mistake is living off credit cards instead of reducing spending or increasing income.
Not Taking Advantage Of Company Retirement-Matching
Many companies offer matching contributions to retirement accounts for employees who contribute a certain amount from each paycheck. Unfortunately, millions of Americans don’t take advantage of this free money towards retirement. They opt to make more money in their pocket today. Retirement planners instruct clients to contribute as much as possible to 401K and other retirement accounts. They are more emphatic when matching contributions are on the table.
Spending Too Much On Rent Or Mortgage
Homes are where we raise our families and make memories. They are the largest expense for most people. When renting or buying a house, no more than one-third of monthly income should go towards housing payments. Buying a home that is too expensive or large is the top money mistake people make.
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