Financial Mistakes Anyone can Avoid

Earnings go a long way toward determining an individual’s financial security. However, high wages do not guarantee long-term financial security any more than lower wages ensure a future marked by a lack of financial flexibility.

Individuals are a variable in any financial equation, and those who can exercise and maintain some fiscal discipline are more likely to secure long-term security than those who cannot.

One way anyone can improve their chances at a secure and flexible financial future is to identify and avoid some common mistakes.

• Delay saving for retirement: Conventional wisdom says it’s never too early to begin saving for retirement. Despite that, surveys indicate many adults are behind on saving.

A 2022 survey from Bankrate found that 55 percent of respondents indicated they were behind on their retirement savings, while 35 percent reported being “significantly behind.” Though laws governing retirement contributions have made it easier for people to catch up, it’s still better to begin saving once you enter the professional arena, which for most people is some time in their early to mid-twenties. The longer you delay saving for retirement, the more precarious your financial future becomes.

• Spending beyond your means: The post-pandemic increase in cost-of-living has garnered considerable attention in recent years, when inflation has driven up the cost of just about everything. There’s little consumers can do about the rising cost of living, but making a concerted effort to curtail spending is one way to combat the spike. However, surveys indicate many people earning significant salaries are living paycheck-to-paycheck. For example, a 2021 report from LendingClub Corporation found that nearly 40 percent of individuals with annual incomes greater than $100,000 live paycheck to paycheck, with 12 percent reporting they are struggling to pay their bills. An assortment of variables undoubtedly contribute to that reality, and one might be a tendency for consumers to spend beyond their means.

Individuals who are struggling to curtail their spending are urged to seek the help of a certified financial planner who can help them devise a budget and alleviate some of the stress and pressure associated with overspending or living paycheck to paycheck.

• Poor use of credit: Credit cards can be a financial safety blanket, but that blanket can soon smother consumers who don’t know how and when to utilize credit. Reserve credit cards for emergency situations and resist the temptation to use them for daily expenses, such as groceries and gas. Credit card interest rates tend to be in the double digits, so unless card holders can pay their balances in full each month, they’re only exacerbating the already high cost of living by using credit for daily expenses.

• Buying too much house: Overspending on housing is another financial mistake, and arguably the one that’s the most difficult to avoid. It can be hard to walk away from a dream home, but such a decision could secure your financial future. Unfortunately, data indicates far too many individuals are spending more on housing than conventional financial wisdom recommends. The most recent Consumer Expenditure Survey from the U.S. Bureau of Labor Statistics found that spending on housing accounted for 33 percent of the average household’s monthly expenses.