Money management is a key life skill, yet so many people flounder when it comes to their personal finances. Why is that? Mostly, it's because they've picked up some bad money management habits along the way.
If you're struggling to get a handle on your money, take a look at these poor money management habits and see if any of them apply to you.
Overspending
Do you have a hard time sticking to a budget? Do you find yourself using credit cards to make ends meet? Overspending is one of the most common money management mistakes people make.
The problem with overspending is that it can quickly become a habit. It's easy to do if you don't have a budget in place or if you have trouble sticking to your budget. Once you've dipped into your credit line or spent more money than you intended, it can be hard to stop. Before you know it, you're buried in debt and struggling to make ends meet.
If overspending is a problem for you, you first need to get a handle on your spending habits. Track where you're spending your money and see where you can cut back. You can also try using cash instead of credit so you can better keep track of your spending. And, if you choose this path, set a reasonable weekly or monthly spending limit for yourself. This way, you won't be tempted to overspend.
Not Saving Enough
Not saving enough money is another common money management mistake. Even if you're not overspending, if you're not putting enough money into savings, you're not doing everything you can to secure your financial future.
Ideally, you should be saving 20% of your income. But if that's not possible right now, start with what you can and increase your savings rate over time. Automating your savings can also help. Have a certain amount automatically transferred from your checking account to your savings account each month. This way, you're less likely to touch the money, and you'll be able to watch your savings grow over time.
You can also set up a separate emergency fund to cover unexpected expenses. This way, you won't have to tap into your savings if something comes up. Just make sure you're not dipping into your emergency fund for non-emergency expenses. And try to replenish it as soon as possible, so you're prepared for whatever life throws your way.
If you feel you have trouble with money management, make it a priority to increase your savings rate and set a weekly or monthly budget for yourself. Your future self will thank you for it.
Contact a local money management firm to learn more.
