5 Tips To Avoid Personal Finance Pitfalls
Managing personal finances is a skill that not all possess. Such a simple concept when ignored can damage more than your weekly spending allowance. Spending without proper precaution will affect your future, preventing you from achieving the goals you’ve worked so hard to earn. By following the simplest of steps, you can better protect yourself and your wallet from the allure of overspending.
When shopping, purchase with your budget and not your eyes. It’s easy to see that new television or car as an acceptable loss, but those expenditures add up quickly. Everyone likes something new, but it’s not always the best choice when living under a budget. If you’re looking to purchase something in the near future, saving is always the best option. Set a goal and work toward it. With each milestone met, reaching your desired outcome will only feel sweeter.
Building and maintaining an emergency fund is not only a good idea, it’s a necessity. Beyond covering yourself for the unexpected, a backup or emergency fund is “found money.” Car breaks down while you’re working toward putting a down payment on a house? Your well fed emergency fund will manage the hit while your plans continue, unhindered. However, your emergency fund is not for use on everyday purchases. If you can’t afford it without dipping into your backup funds, then reconsider purchasing the item at all.
Learn all you can about your taxes, and more importantly your tax exemptions and refunds. Every dime you make passes through a minefield of percentiles levied by your state and federal government. Understanding where that money goes come tax season prevents you from leaving money on the table or losing more than necessary. If research doesn’t cut it, don’t be afraid to consult a professional. It’s their job to understand the tax world, and they may be able to find you exemptions that you’d have missed.
Ultimately, creating this budget is to preserve your financial future. Part of ensuring your relative comfort is making sure you pay into your retirement fund. Maintaining a 401k is an absolute must. Over the years, it’s tempting to dip into the money you’ve accumulated, but think of it as a pennies in an unbreakable piggy bank. This money is more important than your emergency fund, because it’s meant to support you when you’ve retired. No one wants to work well into their 70’s, and maintaining a strong 401k will keep that from happening.
Lastly, be sure to “pay yourself.” Saving with no concept of reward will eventually lead you to resent your efforts. Save money, spend responsibly but allow yourself some freedom. There is no sense in strangling yourself with a self-imposed budget. This is by no means permission to avoid the aforementioned financial planning, but it affords you some freedom without sacrificing the simple joys in life. For some other financial tips check out the link here.