There is a bit of a learning curve when it comes to managing your personal finances. You will inevitably make some mistakes along the way. The key is recognizing these mistakes and taking active steps to correct them immediately. Here are five of the top personal finance mistakes that you need to avoid.
Not Having an Emergency Fund
Especially when you are first starting out in your adult life, it may be tempting to ignore the advice to start building an emergency fund. However, if you learned anything over the last few years of the pandemic, it should be that being prepared for the unexpected is one of the best decisions that you can make with your money. You never know when an unexpected job loss or downturn in the economy will throw your finances into disarray.
You will be forced to resort to more costly ways to pay for necessities if you do not have an emergency fund set up. The last thing that you want to do is to have to take out a cash advance or rack up credit card debt to simply put food on the table. Setting aside a little from each paycheck into an emergency fund can go a long way in helping to protect your financial future.
Not Securing Enough Insurance Coverage
Thinking about insurance is never a fun exercise. However, you must have these hard discussions with loved ones. Many families make the mistake of not securing enough insurance coverage. You will sleep better at night if you know that you have taken the steps to proactively protect your assets and take care of your family in the event of an unexpected loss.
Regardless of if you are shopping for life, home, or auto insurance, the Colby Insurance Group has all of your needs covered. The team of professionals at Colby will show you how to use insurance to deliver the ultimate peace of mind, protecting what matters the most to you.
Focusing on the Wrong Debt
There is no doubt that personal debt can be crushing. However, many people make the mistake of tackling the wrong debts first when trying to pay off these balances. Taking the time to figure out what debts make the most sense to pay off first can save you thousands of dollars in the long run. When trying to determine where to focus your efforts, be sure to write down all balances and their relevant interest rates.
Most advisers will tell you to tackle the highest interest rate debt first. However, other advisers may recommend tackling the smallest debt first so that you can achieve a level of success with paying off a debt completely. This is known as the debt snowball method.
Ignoring Your Credit Score
Taking control of your financial health means that you need to always be aware of your personal credit score. This important number determines what type of loans you qualify for, the interest rate that you are offered, and more. Staying on top of this number and actively trying to raise it can help you to build your wealth.
This means that you should also sign up for a credit monitoring service so that you can ensure that nothing falls through the cracks. In today’s digital world, it is easier than ever for hackers to gain access to your personal accounts. A credit monitoring service will alert you as soon as this happens so that you can address the situation and protect your finances.
Missing Your Employer Match Contributions
One of your biggest sources of personal wealth gain could be from your employer. You are remiss if you are not familiarizing yourself with any potential matching program that your employer may offer. Many employers will offer a set amount of money matching for any individual retirement accounts.
Younger employees are particularly prone to missing out on these contribution matches, erroneously believing that they have plenty of time to save for retirement. Do not make the mistake of leaving money on the table by not at least contributing up to the maximum matching amount.
By avoiding these five mistakes, you will put yourself on a better financial path, building wealth and protecting all of your assets.