When it comes to growing your money or living paycheck to paycheck, it is easy to make mistakes. Unfortunately, these mistakes can add up and lead to financial problems down the road. Take a look at the mistakes listed below and see if they sound familiar to you. Even just making small tweaks in your finances can bring big results.
Not Taking Personal Responsibility
Many women allow a spouse, partner or another person to manage their finances. As innocuous as this may appear on the outside, an emergency or crisis could leave these women in a hole of debt and without resources.
Even if your spouse is well-versed in personal finance, you should be aware of the total income, assets and investments for your household. If your marriage or partnership should end or you become a widow, you will need to know where you stand financially including all bank account information and life insurance policies.
Make sure you are aware of the passwords for each of your family’s accounts and work as a team with your spouse to manage your household’s finances.
Not Creating and Adhering to a Budget
A budget may sound strict, but it’s a financial tool that you can use to stay on track and meet your financial goals. Financial experts such as Dave Ramsey praise the effects of keeping a budget to assist you in knowing exactly where every dollar goes and assigning set amounts to items like entertainment and eating out.
To create a budget, subtract your mortgage/rent and utilities from your total income each month, followed by other expenses like groceries and clothing. Experts recommend setting aside 20 to 30 percent of your income for savings, investments or debt.
Not Saving AND Investing for Retirement
It’s not enough to save for retirement now. Women need to consider investing some of their earnings into diversified investment accounts to grow their money. By taking advantage of compound interest, your money will grow over time.
For example, if you invest $500 a month into a compound account with a six percent annual compounding interest, then instead of retiring in 30 years with $265,514 from a two and a half percent savings account, you will retire with approximately $480,000. Increasing your monthly contribution and the rate of compounding will increase your retirement fund.
Making a $1,000 monthly investment into an annual compounding interest account at 10 percent will result in a value of more than $1.9 million in 30 years and a monthly compounding interest of 10 percent will result in $2.2 million. Investing can mean the difference between barely living when you’re older and thriving during your Golden Years.
Not Asking for Higher Pay Raises or Promotions
Although the pay gap in narrowing, men still earn more on the dollar compared to women. Women on average earn 79 cents per dollar compared to men. According to TODAY, female physicians earn much less than their male counterparts at a few public medical schools — as much as $20,000.
If you are not sure what employees are making in your field, do some research online and take your experience into account. Remember to value your position and your worth and ask for that higher raise or promotion.
Not Living Within Your Means
Whether you are trying to keep up with the Joneses or just enjoy the finer things in life, not living within your means can leave you close to penniless. This can mean financing a larger and more expensive home than you need or can afford or going into more debt to drive a luxury vehicle.
Depending on your income and money management, this type of lifestyle may be unsustainable for you. If you are currently in debt, review your financial responsibilities and consider negotiating or downsizing to a home or vehicle with smaller payments as well as paying off credit card and student loan debt.
Not Spending Wisely
An Ebates survey announced in 2013 that 51.8 percent of Americans use retail therapy to cope with emotional issues. A whopping 63.9 percent of these shoppers are women. In the survey, 57.9 percent of women shoppers purchased clothes and 34.7 percent purchased food when needing an emotional boost.
This type of needless spending could be costing you financial peace, especially if you are adding to your credit card debt. Before making a purchase to lift your mood, wait 24 hours to see how you feel about the purchase. This lapse may give you the time you need to see the item objectively.
Not Making an Effort to Learn More About Finance
Learning more about personal finance can only help you in the long term to grow your wealth and prepare for retirement. Staying naïve regarding simple investments or debt could leave you in the cold without an emergency fund.
Begin educating yourself by reading investment and money management articles, subscribing to a financial program and/or consulting with a financial planner.
After reviewing the above common mistakes that women tend to make with money, are you guilty of a few of these? It’s not too late to learn more about personal finance, invest in your retirement and create a budget. Little steps can produce big financial results in the long term.