Anyone can tell you there’s no “secret” to financial success. It’s basic arithmetic: Spend less than you earn, and you’ll have money to spare.
That’s simple in theory, but harder to put into practice. In 2020, 46 million Americans – about 14% of the population – used all their emergency savings, and many are still working to get back on track. In the real world, navigating finances can seem demanding and even overwhelming.
Don’t worry, though: If you can avoid these four common mistakes, you can get ahead of the curve – and be prepared for whatever the future brings.
- Not Keeping a Budget. If you’re like most people, building a household budget isn’t something you look forward to. But it’s not as hard as you may think – and it’s one of the most important things you can do for your financial health.
A simple place to start is with the 50-30-20 rule. Calculate your total income and set aside half of that for necessities like rent, utilities and groceries. Spend 30% at your discretion on day-to-day purchases, and put the remaining 20% directly into savings.
- Putting Off Saving. Do these quotes sound familiar? “I don’t earn enough money to save, so it won’t do me any good.” “Saving can wait – I need the money now.” If you find yourself thinking along these lines, think again: Saving is for everyone. Young or old, financially secure or still working things out – everyone can benefit from a fallback fund.
When there is a big, unexpected cost, like a hospital bill or car repair, access to savings will be a necessity, not a luxury. Even if you can only set aside $5 a week for a savings account, you’ll have about $260 saved at the end of your first year.
- Having Unpaid Credit Card Debt. There’s nothing wrong with paying with a credit card … as long as you use it like a debit card. Just spend with money you already have in the bank: Not only will it build your credit score and expand your options down the road, but you’ll also avoid the expensive trap of high-interest debt.
If you’re already dealing with debt, make sure you have a plan to pay it off promptly – while still setting aside money for savings. (Not sure where to start? Consider using a debt payment calculator.)
- Not Setting Goals – Or Setting Too Many. Forgetting to plan ahead for important financial goals – like home ownership or retirement – can leave you struggling to catch up. On the opposite end of the spectrum, it’s easy to get too ambitious about money management, which can lead to frustration and disappointment when you make mistakes.
Instead, identify one or two main goals to focus on. Make sure they’re achievable and specific. For example: Start and contribute to an IRA. Pay off a certain amount of credit card debt during a set period of time. Add $1,000 to your emergency fund within the next six months. With an objective in mind, you’ll feel more motivated to keep up good habits on a day-to-day basis.
At Axiom, we believe everyone can take charge of their finances for a brighter, more secure future. That’s why some of our Central Florida branches host personal finance courses, and it’s the reason we offer competitive mobile and online banking services designed to help you manage money like a pro – whenever and wherever you want.
Axiom Bank, N.A., a nationally chartered community bank headquartered in Central Florida, provides retail banking services, including checking, savings, money market and CD accounts, as well as commercial banking, treasury management services and commercial loans for both real estate and business purposes.