Do the words "money" and "bills" and "budget" scare you this time of year? Maybe you spent too much on vacations or summer childcare, or an unforeseen house expense caused you to go into debt and now you are stuck figuring out how to get your finances in order this fall.
The good news is, by learning how to avoid these six spooky money mistakes, you can head into the cooler months armed with the knowledge that your finances don't have to be so scary. Eliminate the frightening thoughts of not having a handle on your finances today!
Just about every financial analyst or website will tell you that you should keep a savings account just for emergencies like loss of a job or for large, unexpected bills.
A general guideline for emergency savings is to have saved about three to six months' worth of income to get you through any trying times. Without savings to dip into, you'll be forced to use other ways to finance your expenses, which can include high-interest credit cards or loans.
If you're not sure how to start saving for an emergency fund, one option is to use the 50/30/20 budget rule for budgeting. In this option, 20% of your income goes to savings, whether that's an emergency fund, retirement fund, or other type of savings.
While paying off debts is a great idea, there is a right and a wrong way to go about doing it. The best way to tackle debt is to pay off loans with the highest interest rates first.
Take some time to write down all your loans, including the balances you owe and the interest rate. Then, sort your debts by interest rate — highest to lowest. Once you pay off the highest, move to the next highest rate loan, and so on. The snowball method of paying off debt is worth a try, but you can use whatever method works best for you, so long as you concentrate on paying off the highest interest rate loan first.
Paying off loans may improve your credit score and free up funds to go toward the next debt or toward savings.
Although we're all for having fun in life, sometimes you can have too much fun. Spending too much money on; dining out, vacations, online purchases, and other non-essentials can really wreck your budget. Even little purchases here and there can add up over time.
To help reign in discretionary purchases, start by reviewing your budget. Then, make a plan to stick to it. You might be surprised with how many things you can easily cut back on — and how quickly that extra money will come in handy.
While it's tempting to save all the money you can toward your child's future college expenses, you shouldn't do so at the cost of your own financial goals, especially retirement.
While not ideal, students can apply for financial aid and take out loans to pay for college. Meanwhile, your options for saving for retirement are not as wide. First, explore your retirement options, and contribute as much as you can to a 401(k) or IRA. Once you've maxed out as much as you can spend toward retirement, add extra income toward your child's college savings.
While it might sound creepy to have someone (or something) monitoring your credit activity, it's actually quite a good idea. In today's online world, identity theft and fraud are everywhere. That's where credit monitoring services can help. The service will do the work of monitoring your accounts and will let you know of any fraudulent activity before it's too late. Free credit monitoring services abound that will monitor your information anywhere it can be found, including the dark web and social media.
Although you can technically borrow money from an employer-sponsored 401(k) account, it's not the best choice. First of all, you have to pay that money back with interest. So in addition to the money you're contributing to your retirement fund, you'll also be making payments on the loan from that same fund. And, should you choose to leave the company before your loan is paid off, you'll have to pay the loan back in full immediately or get stuck with taxes and penalties for an unpaid loan (which could wreck your credit).
Instead, see if you can cut back on money in other areas while staying steadfast in your retirement savings plans.
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