The 6 Worst Financial Mistakes You Can Make

From the Country Financial Security Blog

By Miranda Marquit 01/08/14


So, it’s the new year and you’re working on the 6 ways to increase your financial security. But while you’re working on improving your financial prowess, don’t forget to avoid some of the pitfalls.
You know the six steps to take, now here are the six mistakes to avoid:

1. Failure to Track Your Spending
One of the worst mistakes you can make is failure to track spending. No matter your resolutions, if you don’t know where your money is going, you can’t fix your financial problems. Use personal finance software to track your spending and keep up with where your money is going.


2. Neglecting Your Cash Flow
Not only should you have an idea of where your money is going, but you should also know where it comes from and when it arrives. Your cash flow is the way money moves through your household economy. It involves timing, as well as dollar amounts. If you don’t know when a bill is coming out of your account with respect to when you are paid, you could easily end up with overdrafts – and the fees that come with them.



3. Mistaking Wants for Needs
These days, it’s easy to get caught up in the idea that you “need” something. However, you don’t want to mistake your wants for needs. A need is something that you require for survival, such as food, shelter, a way to get to work, and clothing. A want is something you desire, and think would be nice, but you can live without. When you turn wants into needs, it’s too easy to overspend, since you justify your expenditures.

4. Failure to Prioritize
You don’t have to get rid of all of your wants in order to be fiscally responsible. However, it does help to prioritize your spending. If you don’t know what’s important to you, it’s easy to find yourself wasting money on things and experiences that are just “ok.” Instead, figure out what’s really important to you. What do you really enjoy? What truly enhances your quality of life? After you take care of your true needs (and save or invest for the future), if there is money left over, you can spend some of it on wants you truly enjoy. Cut the unimportant things from your budget, and you’ll be more satisfied with your money situation.

5. Getting Hung Up on the Small Stuff
Yes, it’s important to plug money leaks. But don’t get so caught up with closing the small money drains that you neglect the big stuff. Sure you can save $100 a month by skipping the $5 latte each weekday. But are you missing out on saving $200 a month by cutting the premium cable, or saving $300 a month by refinancing your home? Don’t forget to look for big savings as well as small savings.

6. Assuming You Have to Cut Costs to Live Within Your Means
In many cases, when consumers get serious about their budgets, they decide that the answer is to cut costs. It’s true that cutting costs (especially expenditures related to things that don’t matter to you) can help you get your spending under control and live within your means. However, cutting back isn’t the only solution.
You can also earn more. The great thing about technology, and the opportunities offered today, is that you can earn more money. Start a side gig. It doesn’t have to turn into a full-on business, but if you can earn an extra $200 to $1,000 a month with a side gig, you can ease your budget, and live within your means without becoming obsessed with pinching pennies. And who knows? Maybe it will turn into a full-fledged business.