Money Mistakes You Should Avoid To Be On Top Of Your Expenses

Managing your money has never been a cinch. Regardless of your monthly income, you may find it hard to keep up with your monthly expenses. A lot of people find themselves in an abyss of debt blaming their low wages. Well, your income is wrongly accused of pushing you on the verge of debt.

The way you handle your money plays a crucial role in shaping your financial life down the line. You do not need to have a financial acumen to learn tricks to be in control of your finances, but you rather need to identify your action plan.

·         How are you spending money every month?

·         How much do you spend every month?

·         Are you spending more than your income?

·         Do you often rely on debts to meet your expenses?

·         Are you living paycheque to paycheque?

You must be making the following financial mistakes if you find yourself in the red.

·         Unnecessary spending

It is not a big deal to order a cappuccino at your work or dine out at every weekend with your family, but every little item adds up. It may cost you hundreds of pounds annually that could be utilised to pay off your debt or meet other expenses.

You do not need to stop spending money as long as it is necessary. You can drink a home-made coffee or home-made meal. It is fine if you do it once in a while. Review your spending and identify areas where you can whittle down. On no account should your monthly expenses be more than your monthly income.

·         Continuous payments

There must be some payments that are deducted from your account automatically. Most of the service providers nowadays use a continuous payment system. Look at your bank statement and check if any payments are made this way. Ask yourself if you need it.

Cancel the subscription immediately if it is just costing you. Apart from that, you should look for other subscriptions like gym memberships. You can choose free alternatives like a brisk walk and jogging in the park. It will save you a lot of money. You cannot waste money on such things when you are going through financial hardships.

·         Using credit cards for most of your expenses

It is common for people to rely on credit cards for most of their purchases. It is not a bad idea as long as you pay off your credit card debt on time. Unfortunately, many people lose the track of their purchases and when the bill is generated, they get clobbered.

The interest rates of credit cards are too high and they are charged by the day. The more you delay, the more interest will be accrued. Here are the tips on a better use of your credit card:

·         You should use it for smaller purchases only.

·         Make sure you do not borrow more than 25% of the limit.

Make a note of that amount in your spreadsheet, so you have accurate information about cash left to spend on your expenses. Set aside the money equivalent to the purchase, so you do not struggle to clear your bill.

·         Not saving money

Savings are essential. Without an emergency cushion, you will struggle to meet unforeseen expenses. Although you can take out an emergency loan to meet then, they can be quite expensive. In addition, you should also save for a mortgage, a car and retirement.

Look at you’re your budget and see how much money you can contribute to each of your saving goals. Set a timeframe by which you want to have saved the down payment for your car and house. According to the timeframe, you will decide on the size of monthly payments.

When you have savings for all your future plans, you do not have to take out a 1 year loan for bad credit from a direct lender.

·         Not improving your credit score

It does not have a direct impact on your finances, but a bad credit rating will not let you qualify for lower interest rates. You will need a good credit score when you take out a mortgage and an auto loan. A bad credit score may turn you own. If any lender decides to loan you, they will charge very high interest rates. Therefore, you should improve your credit score. Here is how you can do it:

·         You should take out a credit builder loan to build your credit history.

·         Make sure you pay off your debts on time.

·         Do not ignore the timely payments of rent and utility bills.

·         Make sure that your debt-to-income ratio is not lower than 30%.

·         You should keep your credit utilisation ratio less than 25%.

You should periodically check your credit report to ensure that there are no unidentified accounts. Identity theft is one of the reasons why your credit score is too low.

·         Not investing money

Investments are crucial to grow your money. If you invest money, you can protect your money from the effects of inflation. You should invest your money in multiple assets to diversify your portfolio. It will help reduce your risk. Talk to an investment expert who will walk you through it by analysing your risk-tolerance capacity and investment goals.

Start with investing money on fixed deposit. It will help let you earn fixed interest. Moreover, you can invest money in stocks and mutual funds. They are volatile and hence they are extremely risky. You should not invest more than you can afford to lose money.

·         Not getting insurance

Having an insurance policy is important to keep your family safe and secure after your death. Likewise, medical insurance is essential to meet unexpected medical expenses. You should get medical insurance as soon as you become eligible for it.

Your car also needs insurance to meet repair and maintenance costs. It is a good idea to shop around to by car insurance. It will help you choose an affordable insurance deal. Read the fine print carefully to ensure it will not cost you hidden charges.

·         Not reviewing your spending

You should keep tabs on your expenses to ensure you do not spend more than you repay. Create a budget and note down all expenses you make. Use a budgeting app if you cannot do it accurately on a manual spreadsheet. Once the app is linked to your account, it will automatically record all transactions. A budgeting app can also help you achieve your savings goals.

The bottom line

It can be hard to say on top of your money. Thankfully, there are various ways to prevent your financial situation from being worse. You should create a budget and track your expenses. It will help you prevent from overspending.

In addition, you should invest money to earn return. If you need to borrow money, do it wisely. Never ever borrow money if you cannot repay your debt.