You work hard yet never seem to get ahead financially. Once again, there’s no money at the end of the month. If you consistently feel that way, congrats – you’re normal. Here are 5 financial moves you may be making that will undoubtedly keep you in that rut.
1. No budget
Most Americans get paid every other week and spend their entire paycheck without ever formally planning a dime of it. Sure, most of us know approximately how much our bills are each month. But a vast majority never take that step to create a written monthly budget. This is a serious mistake if you want to get ahead in your finances. A budget isn’t only for the math nerds or those with a passion for spreadsheets. Do what works for you – hand-written, spreadsheet, dry erase board, iPhone app, whatever – but do yourself a favor and tell your money where to go each paycheck. Give every dollar a name (groceries, haircuts, dog treats, gas bill, vacation savings, etc.) and stick.to.it. A written plan will bring you back on track.
2. No emergency fund
Emergencies happen. And if you’re not prepared you’ll likely turn to credit cards to fix your situation. The car will break down and the roof will leak. You can plan on that! Start stashing away money each month to have a small nest egg in case you need to dip in to take care of the unexpected home repairs, car trouble, urgent care visit, etc. Don’t rely on your available credit or payday loans as an emergency buffer. You’ve already got credit card debt — an emergency fund is your way to keeping those balances low and stay ahead of the money game.
How much should you save? Start with $1000 and work your way to saving several months’ worth of household expenses. The feeling this will give you is hard to measure. And guys, marriage pro tip: the security your wife will feel is even greater.
3. No meal plan
It doesn’t matter if you’re single, married, have one kid or a Duggar-sized brood – you’re missing out if you don’t plan out your meals each week. This will save you some serious coin. In an age of two-working parents and increasing demands of the job, you will always spend more without the food plan. You’ve certainly experienced the most common question asked around 5:30pm – “what’s for dinner?” If you don’t have a plan, what’s the likely response? Eating out. Again. Take 30 minutes on Sunday night and plan it out. And store those meal plans away so you can reuse them another week.
4. Minimum payments on credit cards
When Federal regulators started requiring credit card companies to clearly label statements with the effects of only paying minimums on credits cards, tensions were high among financial institutions. But the reality is, there was nothing to worry about. Poor financial habits kept Americans paying minimums regardless of the known consequences. Let’s say you’ve got a $10,000 balance on your credit card and only make the monthly minimum of $250 each month. It could take you 28 years (or more) to pay it off, depending on how your bank compounds the interest. And the interest you’ll pay will be one and a half times the principal, that is, if you can go 30 years without adding to the balance. Needless to say, start chunking down those credit cards as fast as you can — huge savings.
5. Extras, extras, extras
Go through your last 3 months of bank statements and see how many of the purchases could be considered “extras.” I bet there’s a ton. Getting a macchiato each morning, buying lunch with coworkers daily, that extra $10 extra each Target trip, iTunes impulse buys — you know your vice. It’s nice to treat ourselves with extras once in a while but you’ll stay in a financial rut without carefully considering the impact on the big picture.