Spending traps can interfere with your long-term financial goals.
Its hard to make smart money choices all the time, but at the very least, you can avoid some all-too-common – and expensive – errors. Whether it’s budgeting by the month, instead of the year, or forgetting to save for future emergencies, these mistakes can mess with your finances unless you take steps to correct them. Here are 11 blunders almost everyone makes and how to stop yourself from falling into the same trap:
1. Budgeting for the short term.
Research suggests that creating an annual vs. monthly budget works best, largely because we feel less confident in our annual estimates, so we tend to add more cushioning for unexpected expenses. In a 2008 study, college students underestimated their monthly expenses by 40 percent but overestimated their annual expenses by 3 percent.
2. Skimping on career investments.
Career or development course can help you snag a promotion, get “unstuck” from a career rut or transition into your dream job. The price of one-on-one coaching typically starts at around Rs 2000/- an hour, but less formal advice can come from meeting with experienced colleagues over lunch or coffee.
3.Spending for the reward.
Rewards credit cards sound good in theory, but in reality, they encourage you to spend more than you would otherwise. Economists dub this phenomenon “purchase acceleration,” because you ramp up your spending when that reward is in sight. Rewards cards also tend to carry a higher interest rate than non-rewards cards.
4. Failing to negotiate prices.
Even department stores often offer some wiggle room on their posted prices, and big-box stores usually match competitors’ prices. Research online ahead of a shopping trip so you know what other retailers are currently offering. Many consumers fail to realize that prices are flexible and don’t bother asking for a better deal.
5. Earning income from only one source.
Few workers hold onto the same job or work for the same company their entire careers these days. While some job changes are voluntary, many also come from layoffs. By earning income from a variety of sources, workers can increase their financial stability. Options for new sources of income include freelance work, selling crafty creations online or offering coaching services in your area of expertise.
6.Taking on too much, or too little, debt.
Not all debt is bad. It can enable you to return to school, buy much-needed professional outfits before receiving your first paycheck or even cover your rent during a tough month. Being so afraid of debt that you avoid it altogether can force you to miss out on opportunities, while taking on too much can lead to financial ruin.
7. Overspending on gifts.
Instead of splurging on gifts you’re not even sure people really want, why not give recipients something handmade (and filled with love), like baked goods or a coupon to spend time together.