Managing money responsibly doesn’t just happen. Even with the best of intentions, many people make mistakes in how they handle money without even realizing. But there’s good news! Harmful behaviors can be unlearned. Let’s look at three common money mistakes and how to fix them.
Mistake #1: Ignoring your finances
It’s easy to go about your day without giving much thought to your money. You might not know exactly how much is in your checking or savings accounts, much less your credit score. Some even avoid thoughts about debt. The hard truth, though, is that ignoring money can lead to big-time consequences, like excessive debt, missed payments and an empty savings account.
The fix: To avoid this mistake, assess your income, expenses and savings regularly. Creating a budget can help you get a handle on your financial inflows and outflows. This way, you can identify areas where you can cut back, save more, and achieve and maintain financial wellness.
Mistake #2: Not having a clear money vision
The second common money mistake is a lack of financial plans or goals. Without an established money vision, it can be challenging to make smart money choices.
The fix: Establish short-term and long-term financial goals. Whether it’s saving for a down payment on a house, starting a business, or planning for retirement, having a clear vision will guide and motivate all your financial decisions while ensuring you're making choices you can live with for years to come.
Mistake #3: Not discussing money
The third common money mistake is failing to talk about money with your life partner. Money is a sensitive topic, and many people believe they can avoid arguing over money by not talking about money. Unfortunately, though, not talking about it can lead to misunderstandings, conflict, and financial instability within the relationship.
The fix: Have open and honest discussions about money with your partner. By establishing open lines of communication, you can work together to create a joint financial plan that aligns with both partners’ values and aspirations.
Use this guide to learn how to fix three common money mistakes and avoid making them in the future.
If you enjoyed this article, find more just like it on the rest of our MoneySmart Tips blog.