Avoid Money Management Mistakes
Avoid Money Management Mistakes
1. NO SPENDING PLAN.
The “where does the money go?” question frequently comes up because of spending on a day-to-day basis, without any sort of plan for taking care of needs and wants. Here’s where a money management program can help you spend your money wisely, to reach your goals.
First, set up priorities: know your regular expenses; determine what your goals are in relation to short-and long-range aims. Take critical look at your expenses and weed out those that don’t give real satisfaction.It’s not how much you earn, it’s what you do with your money.
2. NO CASH RESERVE. Financial experts recommend that every family have a cash reserve of at least 50 percent of their annual income. To acquire this means developing good saving habits and self-restraint in spending. There is a definite need to save so you have an emergency fund when unexpected expenses arise.
Knowing you have a safety margin of savings will also give you a feeling of security and greater peace of mind. And don’t forget a savings account enhances your credit standing.
3.TOO MUCH USE OF CREDIT. Using credit can be a real help or a trouble spot. depending upon how you use credit. The biggest problem usually is that families overextend themselves and become committed to larger payments than they can meet.
Credit terms differ, too. Shop carefully for credit–as carefully as you do for goods and services. Be sure time installments fit into your budget and don’t take on more than you can handle. Know the cost of credit terms. The real cost. Keep track of expenditures made with charge accounts or credit cards, so the bills won’t come as a big surprise to you. And pay on time to keep your credit rating solid.
4. NON-CONSTRUCTIVE USE OF WINDFALLS. You receive a tax refund, a bonus or raise, perhaps an inheritance. Most families are inclined to spend the extra money on luxuries they wouldn’t ordinarily consider. And poof, the money’s gone.
There are many ways to put “windfalls” to constructive use. Add pay raises to your savings before you get in the habit of spending the extra money. Use refunds or bonuses for needed large purchases, such as major appliances. You’ll also save paying out interest charges.