Master Your Money: Tips to Avoid Costly Financial Pitfalls

The financial choices and habits you make today may affect your entire financial life. These mistakes may take months or even years to bounce back from. You may make a misstep or realize you could have done better. Was it overspending? Was it spending money every day for a coffee and breakfast sandwich?

You can turn your mistakes into smarter choices with your money. Learning from your missteps and knowing how to avoid them may steer you toward financial success in the future. Check out these common financial mistakes and the best ways to overcome them.

Unnecessary spending

If you love getting your daily coffee or takeout meals, it may not seem like a big deal, but it is. Small, routine items add up. For instance, spending $6 to $8 per day for your favorite latte or cappuccino costs you around $3,000 per year! This money could instead go toward a credit card payment or other debts. Avoid this common spending mistake if you’re dealing with financial hardship. To help with your finances, include this type of daily spending in your budget. When you plan for small items like coffee every day, you can afford it. Or, after looking at the amount you spend on something like this per week, you may realize it doesn’t have to be an everyday expense.

Never-ending payments

Do you have a gym membership, streaming subscriptions, or other recurring fees that you pay monthly, every year? Have you now just realized that some of those payments may be on auto-pay and you cannot recall the last time you were notified? Think about how much you’re paying a year for these services – it can add up. Consider saving money by either finding cheaper solutions or canceling your subscriptions.

Living on credit cards

When you rely on your credit cards to pay for everyday expenses, it’s too easy to build debt in a short period of time and stop paying attention to your budget. As you use a chunk of your paychecks to pay off the minimum balance, the interest charges add up. Don’t charge more than what you can pay off. Make timely payments and don’t carry a balance each month.

Not saving

Living paycheck to paycheck may not help stock away money. Any missteps, such as a missed paycheck, could hurt you financially. Creating an emergency fund gives you a buffer when unexpected situations happen. Keep at least three months of money saved in an account you can access.

Not investing in retirement

Without money to help with retirement, you’ll continue working. Make monthly contributions to an account where your investments can grow. Think about tax-advantaged accounts such as a 401(k). If your employer offers a match or contribution, take advantage of the option. You can also contact a financial advisor to assist you with your goals.

Paying off debt with retirement funds

Dipping into your retirement account may be difficult to pay back. If you’re younger than 59-and-a-half and you decide to withdraw money, you may pay a 10% penalty on the amount. Early withdrawals also count as taxable income. Getting a 401(k) loan may be an option but think about how you’ll rebuild the account.

Not planning

If monitoring your finances isn’t part of your daily routine, make it a priority. You won’t reach your financial goals without a plan. Your plan should include investing, how much to save for retirement, and other goals, including homeownership. Without goals, you may never have the money for a down payment or a comfortable retirement.

Not budgeting

Without a budget, you don’t have control of your financial situation. You may still earn a decent paycheck but struggle day to day. Your financial goals will be difficult to reach. With a budget, you can track where your money is going.

Borrowing money

When you’re in a difficult financial situation, you may try to borrow from friends and family. This could put a strain on your relationships. They may ask for the money back if they begin to question your spending habits. For this reason, if you’re on the giving end, try to avoid loaning money to friends and family.

Making choices based on fear or pressure

When you are afraid or pressured, you may not weigh all the options and make a costly mistake impulsively. Step back and think it over. You could also talk it over with a trusted friend or family member.

Let Us Help You Reach Your Financial Goals

Adirondack Bank is here to help you achieve your financial goals with options, no matter where you’re on the journey. From checking accounts to savings accounts, we have a variety of products and services that may fit your financial needs. We also have our Learning Center with finance and investment calculators, financial education modules, videos, and more to assist you with learning and understanding your goals.

When you’re ready to open a personal checking or savings account, save a trip to one of our branches. Check out our new online application to get started today. Use your smart phone, laptop, or tablet – the choice is yours – from anywhere and at any time! Contact your nearest branch for complete details.

The information in this article was obtained from various sources not associated with Adirondack Bank. While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. Adirondack Bank is not responsible for, and does not endorse or approve, either implicitly or explicitly, the information provided or the content of any third-party sites that might be hyperlinked from this page. The information is not intended to replace manuals, instructions or information provided by a manufacturer or the advice of a qualified professional, or to affect coverage under any applicable insurance policy. These suggestions are not a complete list of every loss control measure. Adirondack Bank makes no guarantees of results from use of this information.