There are tons of costly mistakes you could be making when it comes to managing your finances. Month after month, you might be throwing your money out the window simply because you don’t know any better. Stop making these errors and you’ll have more cash in your bank account.
Not paying your bills on time
Do you sometimes put off paying your bills even though you have money in the bank to pay them? Late payments can cost you money in additional interest – the higher the balance on, say, your credit card the higher the late payment. Why throw $100 out the window because you paid a few days late? Procrastinating isn’t worth it. Plus, too many late payments could affect your credit rating over time.
Not paying attention to fees
Quick: what interest rate are you paying on your line of credit? How much does your bank charge when you withdraw money at an ATM? What is the management expense ratio (MER) on your mutual fund? If you can’t answer these questions – or if you don’t understand what the question means – you have a problem. Would you go into a store and buy, say, a jacket without asking how much it cost first? Of course not. Know your financial products and how much they cost to use.
Not having a rainy day fund
With record unemployment numbers during the recent recession in Canada, no job felt safe. But no matter what the economy is doing, it’s always important to make sure you have money saved in case you can’t work for a period of time, whether through job loss or illness or injury. Plan on saving enough money to pay your living expenses for at least six months. That should be enough of a cushion to get you back on your feet. And don’t confuse a rainy day fund with your RRSP – you should avoid tapping into your retirement savings to pay your bills.
Not taking enough risk
Does this sound paradoxical? I mean, risk just sounds so….risky. The thing is, if you are saving money for retirement, you need to have a balanced investment portfolio in order to make sure you grow your savings into an adequate nest egg. Simply putting all your money in a low yield but very safe investment like a money market fund or a savings account won’t keep up with increases in the cost of living between now and when you retire. Some risk is necessary if you are saving for your retirement.
Not getting professional advice
There are times when you really need professional financial advice to help you make the right choices and avoid costly mistakes. For example, a qualified financial planner can help you balance investment risk in a portfolio so that you can have adequate savings at retirement. An accountant can help you take advantage of tax planning opportunities. And if you are preparing a will or power of attorney, using a lawyer to help in the preparation is key to avoiding mistakes and making sure your wishes are met.
Not sweating the small stuff
That cup of coffee you buy every day is only $2 so what’s the big deal? Do the math and see. At $10 a week, 52 weeks a year – that’s $520 you’re spending on something you could just make at home for a fraction of the cost. Same goes for lunches, the cost of parking your car….a million little expenses you might not think twice about.
Buying on impulse
You go into your favourite store and everything is on sale. So you end up buying a boatload of stuff you don’t even need – just because it’s half price. The truth is you don’t need something more just because it’s cheaper. If you find yourself face to face with an item you’re not sure you need but it’s calling your name, walk away and sleep on it. If you still think you need it – and it’s affordable – then you can reconsider the next day.
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