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Published on April 12, 2023 | LPL Financial
Could you be losing money because of simple monetary mistakes? Avoid these money-wasting habits in 2023 to have more cash when you need it—or save it for a rainy day.
Conventional wisdom says to follow the 50/30/20 rule, meaning you should put no more than 50 percent of your income toward necessities like food and housing, only use about 30 percent for arbitrary spending, and then reserve about 20 percent for savings. You won’t know whether you are meeting these goals, however, if you don’t create a detailed budget. Start by carefully noting what you spend each week for about a month, eliminating any unnecessary expenses. Then create a budget for yourself to ensure you’re sticking to these reductions. If you can decrease your regular spending, you may find that when the next new year arrives, you’ll have more funds for important things like retirement or a down payment on a house.
A common mistake people make is using their credit card for extras like dinners out or shopping trips and then not paying it off right away, thus incurring extra interest charges. This year, try to avoid accruing excessive credit card debt by never charging more than what you can pay back right away. You should also check the balance on your credit card weekly to make sure it’s not getting to be more than you can handle.
There are times in life when things go wrong—like when you get a flat tire or your pipes spring a leak. Even a small emergency can result in a financial catastrophe if you don’t have money set aside for circumstances like these, as you may have to resort to using credit, which you’d then have to pay back with interest. To avoid this, aim to save at least a little money out of your paycheck weekly so you’ll have an emergency fund if something unexpected happens; you should build it up until it equals at least three months of your pay.
Do you subscribe to multiple media sources, such as cable TV, news, and streaming services? If you add up how much you’re paying in total for all your subscriptions, you may be surprised! Consider keeping just your favorites and canceling the rest. Also, check what you’re spending for other services that have recurring monthly fees, like your gym membership. If you aren’t using them consistently, consider dropping them as well.
There’s an app for just about everything these days, but they can come at a cost. With just a few taps on your phone, you can order takeout, request a ride, and get your groceries delivered without even having to think about it. Though these apps can be big time-savers, the money you spend with them can cut into what you could otherwise put into savings or financial investments.
Many employers offer a 401(k) program in which they match a certain percentage of the monetary amount their employees put into their accounts. That’s a nice bonus! Many people skip this opportunity to save for their retirement simply because they don’t understand how a 401(k) works, so they unwittingly miss out on an additional thousands of dollars they could earn each year. Ouch! If you need more information about the plans your employer offers, schedule a meeting with a human resources representative at your workplace to get the details.
Society teaches us to think we must have the latest and greatest—whether that’s the most fashionable clothes, the fastest car, or the most luxurious home. But those outward trappings of success can come at big financial costs. If you could spend less on these items, such as by replacing furniture or personal belongings like furniture and other items less often or buying used, you could take the money you might have spent on these things and augment your savings. Then you could have enough funds for a dream purchase one day down the road.
This article was prepared by ReminderMedia.
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