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Financial mistakes can cause a lot of stress. Have you ever made a financial mistake that you later regretted? If you said no, I’m going to go ahead and call your bluff and say that you’re “fabricating the truth”. LOL.
I have made SEVERALfinancial mistakes. Truth be told, I make financial mistakes on a monthly basis and you do too. I hate to break the news to you ladies and gentlemen but we’re human – no one is perfect. A few years ago, I opened a store credit card against my better judgment. I opened this card because I wanted to save an additional 30% off of my purchase. I made a vow that I would immediately pay off the balance and cut up the credit card as soon as it arrived in the mail. Well, that didn’t happen and I found myself in debt! I kept the card, placed it in my wallet & continued to use it. This card was not only a store credit card but it was a store credit card with a VISA logo. Dum…dum…dum! Where are the sound effects when you need them?
A few months later, I found myself carrying a balance of $700.00!! How did I go from purchasing one item to carrying an account balance that exceeds the cost of the initial purchase? The items that I purchased were nice but I should’ve either paid cash or left the item in the store. The sad thing is, I can’t tell you what I purchased.
The guilt that comes with making financial mistakes is tough.
Although making financial mistakes can be rough, I am here to tell you that it’s not the end of the world. In fact, it’s up to you to learn from them and to move on.
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4 Financial Mistakes to Avoid in 2021
As we embark on a new year, I want to introduce four financial mistakes to avoid in 2021.
1. No Emergency Fund
Everyone should have an emergency plan in place! PERIOD!
According to Dave Ramsey, an emergency fund is an account where money has been set aside for unexpected events. Unexpected events = legitimate emergencies such as home repairs, vehicle repairs, and unexpected medical events.
A few days ago, I stumbled across a post on Instagram that said I don’t care how many bills are due, I’m still going out to eat #period! Bay-bay (not baby but bay-bay), let me tell you, if you have bills that are due, PAY YOUR BILLS! Don’t tap into your emergency fund to pay for a meal at a fine dining establishment. That’s not cool.
Emergencies are going to happen, so it’s best to take the initiative now to prepare for them. There’s no better time like the present!
If you don’t have an emergency fund – start one today. I often heard that your emergency fund should be equivalent to three to six months of yourtake-home pay. If you do not have three to six months of pay, that’s okay. Start small. Start with $500, work your way up to $1000 and continue that process until you have enough money saved into this account.
2. Succumbing to Peer/Societal Pressures
Do you remember the “Just Say No” campaign from the 90s? Use it when you feel pressure to spend money.When your friends pressure you to pay for something that you can’t afford, just say no!
Crazy how others try to spend your money for you, right?! I succumbed to those pressures, on multiple occasions. I used credit cards in order to keep up with my friends. Every month, I’d pay the minimum payment (on a card with a high APR) while my racking up debt. What’s up with that?! I got tired of repeating the same pattern on a monthly basis. Before I knew it, the word “No” became a recurring word in my vocabulary!
Friends may have good intentions, but if you want to improve your financial situation you need to be honest with them! Let them know that you don’t have the money. If they’re your real friends, they will support you and stand by your decision.
Making wise fiscal decisions is awesome. Stop making mistakes. Refrain from making unnecessary purchases, set a shopping budget and stick to it!
3. Stop Spending Excessively
Stop spending excessively! In order to improve your financial situation, STOP making bad financial decisions.
This was (and at times still is) a tough lesson for me. A few years ago, my mindset was all jacked up. My mentality was if I want it, I’m going to get it by any means necessary. Now don’t get me wrong, there’s nothing wrong with being ambitious and setting goals. However, when it comes to your money (and you dont have any), you need to think rationally!
As a recovering shopaholic, I always stop and ask myself three questions before committing to a purchase: can you afford it, do you have the cash to pay for it and do you really need it?I am a Target fanatic, I love everything about this store. Now that my spending is under control, I have pep talks (with myself) in the car to emphasize the purpose of the shopping trip. Some say it’s crazy but it works for me!
In the past, I’d lose my mind in Target. As soon as I walked into the store, my shopping cart would direct me to each department and I’d ooh and aah as I’d frolick down each aisle. My trips would be epic failures because (1) I would walk out with items that I didn’t need and (2) I’d have to make an additional trip because I did not pick up the items that were originally on my list.
This leads me to my next point.
4. Credit Card Misuse
If you follow my blog, you should know by now that I am deep in credit card debt. I have made great progress since launching this blog. I have paid off four credit cards, I have 3 more to go.
Check out my Related Posts
- September 2018 – Debt Payoff Report
- October 2018 – Debt Payoff Report
As I mentioned in the third step, Target was my weakness. I would have mini-shopping sprees at my own expense. Everything I purchased went on a credit card. I was setting myself up for failure. Cash was never an option.
On one credit card, I paid the minimum payment for 2 years. I carried over a large balance and paid 24.99% in interest fees on a monthly basis! I gave the credit card company a lot of money.
Watch your spending, you do not want to affect your credit utilization ratio. Credit Karma defines credit card utilization ashow much of your available credit you use at any given time. Rule of thumb is to keep your credit utilization under 30%.
Don’t get me wrong, some credit cards offer great incentives, however, don’t let those perks entice you to spend money that you do not have.If you can pay the payments off in full the following month, then, by all means, use your credit card if you desire to do so.
Don’t rely on them because it can hurt you in the long run.If you’re like me and you cannot pay the balance in full – don’t buy it. Besides, you probably can’t afford it anyway.
Avoid these common mistakes in the new year! If you avoid these mistakes, you’re one step closer to achieving financial freedom!
Start 2019 with a bang and avoid these mistakes. If you fall short in January, no worries. Start over in February. You have 12 months to make the change.
Have you made any financial mistakes? What are they and what did you learn from it? I’d love to hear about it.
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