Sure, knowing between an 401k vs ira that better suits your financial situation is important when you plan for your long term future, having enough to live off and still being able to enjoy life experiences when you do finally walk away from work, but you may not be contributing enough to retirement, or anything at all, if you are not managing the rest of your finances correctly. Between monthly expenses, spending money, not to mention saving, money can run out pretty quickly, so perhaps it’s time to examine where every dollar is going so you can make the needed adjustments where you can in order to maximize hanging on to every dollar you can, compared to virtually flushing down the toilet.
Not Tracking Spending
You probably know off the top of your head how much your paycheck is for, but could you say how much you spend a month in gas? Food? What the total of your monthly bills are? Well a good way to actually see where every dollar is going is to track it. If you take last month’s credit or debit card statement you can go line by line and see which charges were necessary, and which, well, could have been avoided. Just for fun you can circle the items that could have been avoided and see how much you could still have left in your bank account that could have been put to better use.
Going Out to Eat Instead of Eating at Home
While yes, it’s great to have someone cook for you, serve, and clean up afterwards, but that certainly does come at a price when you see the cost of how much it is to go out to eat, let alone take a large family out. Going grocery shopping is where you can save hundreds per month by preparing meals at home, whether it’s breakfast in the car on the way to work, packing a lunch, making dinner, even having snack, drinks, and even brewing coffee for your travel mug. Sure, it will be an adjustment, but necessary if you’re really looking to free up money.
Paying Credit Card Interest
Probably where a lot of your money is going on a monthly basis is towards credit card interest, paying back the debt you have charged up, but were not able to pay the full statement balance by the due date and had to carryover a balance. Depending on the card you have the APR could reach upwards of 16%, and depending on your balance, could make for hundreds of dollars of a minimum payment, of which if you only pay the minimum it will do little to decrease the balance, so large payments will need to be made until the balance is gone.
Not Checking Your Credit Report
These days you just never know who has your information so it’s a good idea to check to ensure everything reported is accurate and up to date. The three major credit bureaus offer a free copy of a credit report once a year to be requested, so that would be a good of time as any to review for free. While it won’t have your credit score included, credit card statements are now including the score so you can see on a monthly basis that your score continues to go in the right direction, as high as you can to get the best rates on the market.
Living Beyond Your Means
No two people are alike, and same goes with salaries between family and friends, so there is no point in trying to keep up, especially if it risks you going into debt and wiping out your available money. From the size of the mortgage you have, to the car payment, not to mention flaunting on spending money and travel, it depends on what you can afford, and setting a spending budget might make sense. While you still need to enjoy life experience, you should try to plan in advance as much as you can in order to save up over time and not risk going into debt.
Not Making the Necessary Cuts
While you can make all of the right financial moves but still need to free up extra money, then maybe it’s time to make the hard sacrifices and make cuts where you can. You hear many people cutting the cable cord these days, well if you think about how much live TV you actually do watch, maybe you can sacrifice all of the channels that you don’t watch and opt for only a streaming service, that’s you’re probably paying for right now anyways.