"Act Your Wage" - Tips To Get Your Money In Order
Do you know what my biggest financial fear is? Not being financially secure. I guess this comes with age, taking a step back, and asking myself, “Do I have enough in savings to sustain my current lifestyle should I lose my job or there be some major life expense I need to handle?" or "Why did I spend my entire 20's living at or sometimes above my means and not focusing on building wealth?" The answers to these questions can be scary, especially if the answers bring you to the realization that you aren’t financially secure. The reality of it is many people are financially dependent on their jobs, live paycheck to paycheck, and do not save nearly enough should an unexpected expense arise. To know better is to do better, so let’s explore the money mistakes you might be making and solutions for repairing.
Money Mistake 1: Not having a personal financial plan
You can not understand your next financial move if you do not know where you currently stand. It’s important to have a personal financial plan for your income and expenses that you use as a guide for spending and saving. The key to living below your means is to know your expenses and to spend less than you make. A good monthly financial plan can help ensure you pay your bills on time, have funds to cover unexpected emergencies, and reach your financial goals.
Money Mistake 2: Not having an emergency fund
One of your savings priorities should be an emergency fund. While it isn't glamorous, this underappreciated financial tool really pulls its weight during hard times. Having cash on hand that you can use for an unexpected expense, or to pay bills if you lose your job, is vital because it can help you avoid having to rely on credit or tap your retirement savings. If you don't have emergency savings to fall back on, a minor money shortfall can quickly turn into a major cash crisis. You should aim for at least 6 months’ worth of expenses saved in your emergency fund.
Mistake 3: Not saving before spending
Do you continue to worry that you're not saving enough? Do you routinely rely on credit rather than cash to pay for the things you want or need? Rather than blame this financial gap on your income, look a bit deeper, because the real culprit may be the lack of financial priorities. If you tend to save only what you have left over every month, you leave yourself open to not saving at all, as there may not be anything left to save. You should treat your savings like a bill and put yourself on a more disciplined course by having a fixed amount taken out of your paycheck automatically for savings. Save first, then spend what's left over.