We all have the best of intentions when it comes to managing our money but between unexpected things happening and our need for the latest phone or the newest gadget we all tend to overspend.
Here are some things you may (or may not) be doing wrong:
1.) Wrongly Perceiving value. Do you realise retailers purposely put items on sale slightly below their price to make them appear cheaper? i.e. – listing a product at $1.99 instead of $2 (not that you can buy much for that these days), because in the mind of the consumer (ours) it looks cheaper.
2.) Carrying a balance on your credit card. Let’s say the balance on your card is $5000. Interest rates on credit cards generally sits at around 17-18%. That means that in a year you would pay $900 in interest. Try to pay off or at least reduce the balance you owe as quickly as possible. Remember that while banks are there to give you helping hand, they are also businesses and credit cards are designed to make them money.
If you have two credit cards, a good strategy to follow is to make the minimum payment on the card with the largest balance and pay as much as you can on the card with the smaller balance, until it’s paid off. Then you can focus on reducing the amount you owe on the larger one.
3.) Not making enough noise at raise time. Don’t march into your boss’s office every day and demand a raise because this will not work out well for obvious reasons. If you feel however that your performance is deserving of a raise, then ask. A raise means more money for savings, retirement and college funds and yes, nicer things.
Let’s say for example that you earn $6000 a month and you get a raise of $1500 and save $500 a month of that for two years. That’s an extra $12 000 that you didn’t have.
4.) Failing to save for emergencies. You need to be putting money toward and emergency fund each month. While losing your job, getting into an accident or an unexpected legal bill are generally not things you want to think about, the reality is that they happen. A good rule of thumb is to save enough money up to cover your expenses for 3 – 6 months. Look for a savings option with a high interest rate. If you’re going to be saving money for emergencies, you might as well make it work for you.
5.) Not keeping tabs on your spending. Lunch one day, dinner and drinks the next, then McDonalds for lunch. While these don’t seem like much individually if you add them up over a month, you may be pleasantly surprised. One of the biggest culprits in this area is your debit card. While paying by debit is essentially the same as using cash, people have a tendency to overspend because they have direct access to their account as opposed to being limited by carrying cash.
The answer to this one is a budget. Draw up a budget that takes all monthly expenses into account and includes an allowance for entertainment. Then do your utmost not to step outside the boundary you’ve set for yourself. And stick to using cash instead of card for recreational expenses because it’s a lot easier to control spending this way.
- License: Creative Commons image source
This article was written by Daniel Stevens who is a fan of the great outdoors and when he’s not writing up a storm 😉 – that’s where you’ll find him.