According to The Federal Reserve, 40 percent of American households aren’t prepared to deal with an unexpected expense of 400 dollars. Are you part of this 40 percent? If so, then you can change your financial situation around and prepare yourself to deal with unexpected expenses by having a money savings strategy.
But, they’re many oversights that you can make in the process that hinder your financial savings progress. Luckily, by learning about common savings mistakes such as this one, you can take steps to avoid them.
1. Failing To Start Saving Money
The most common mistake that people make when saving money is failing to start. Often, people wait until they reach a certain milestone, such as earning a specific annual salary, to start saving money. While this may seem like a logical decision, the time to start saving is now, even if you only have a few dollars to put aside each month.
2. Skipping Out on Creating an Emergency Fund
Imagine; you walk out of your front door as you do every day to head to work, but this time, you trip and twist your ankle. You go to the Emergency Room to have your ankle set and are handed a medical bill. Would you have the money to pay for it?
While you want to put money aside in a retirement fund, you also want to save money in a separate, easily-accessible account to act as your emergency fund.
3. Setting Unclear Financial Goals
When setting financial goals, you must give your money a job to do. By not having a clear goal for your savings account, you’ll have a hard time putting money aside. In other words, if you don’t know what you’re saving your money for, then you may start to think about why you’re saving money in the first place.
4. Having All Your Money in a Savings or Checking Account
Although having all your money in a single savings or checking account may seem like the easiest way to save, doing so can lead to many issues. For example, you increase your risk of loss if you keep all your money in the same account.
5. Investing Your Money in Things You Don’t Understand
Before you invest in anything, whether it be a stock, mutual fund, or other financial product, you must first read the fine print. If you have any questions about the financial product that you want to invest in, then you can ask your financial advisor for clarification.
6. Lacking an Aggressive Money Saving Strategy
Aggressive savings involve saving more than 30 percent of your take-home income. An aggressive savings plan allows you to save a large amount of money within a short time span. If you want to find out more, then read this article on aggressive savings plan ideas.
Avoid These Common Savings Mistakes
Now that you’re aware of these common savings mistakes, you can take steps to avoid them.
Need more information and advice on saving money? If so, then keep scrolling through our personal finances archives.