Managing your money can feel stressful and complicated, especially since it’s important to make the right financial decisions to achieve key goals. Knowing how to manage your money properly involves knowing what you need to do — like making a financial plan. But it also means knowing what not to do. Many Americans make the same common money mistakes, and these mistakes can be costly.
To make sure you’re not sabotaging your chances for financial success, it’s helpful to look at some of the big money mistakes you might be making right now. Here are five common financial faux pas that could be costing you your chances at financial security and that you’ll want to be sure to avoid.
1. Not having a budget
Just 2 out of 5 Americans have a budget and a clear idea of what they’re spending their money on. This proportion of Americans who are carefully monitoring their spending has held steady since 2007. Unfortunately, this means around 60% of people are flying blind when it comes to managing their income and outflow.
If you don’t have a budget and don’t know where your money is going, there’s a good chance you aren’t allocating your money as wisely as you should be — and there’s also a good chance you’re overspending.
Less than half of adults responding to the 2017 Consumer Financial Literacy Survey believed they had a good idea of how much they were spending on housing, food, and entertainment, and separate data reveals when people do track their spending, their costs are at least 20% higher than expected.
To avoid wasted spending, use a budget to take charge of how you allocate your hard-earned money. Track your spending for around 30 days first so you can ensure your budget is realistic, and don’t forget to budget for savings.