Money management may be a dull topic for most people, but managing finances poorly can lead to a lot of avoidable financial stress. Learning to be aware of and prioritize where money is flowing is a crucial habit to establish. After all, it’s very easy to spend money and not so easy to make it.

Don’t make these 10 common financial mistakes.
 

1) NOT SAVING FOR RETIREMENT

Retirement—especially for those just starting out in the work force—can seem impossibly far away, but it’s never too early to start saving for retirement. Even with a part-time job, putting a small percentage of a paycheck away every month can make a big difference. Remember: The sooner you start saving, the more years you’ll have to build up your funds.

Speaking of retirement funds, using retirement savings to pay off debt is also risky. Taking money out early halts compounding interest and there may be fees charged for early withdrawal. All of this impacts your ability to properly prepare for retirement.
 

2) IGNORING A LOW CREDIT SCORE

Having a low credit score isn’t just a number. A low credit score can cost you a lot of money and cause difficulties if it keeps being ignored. Having a bad credit score means you’ll be paying more for mortgage, higher credit card interest, and possibly even more for insurance. Fixing a bad score is difficult but not impossible and can be done with careful planning and a sound financial strategy.
 

3) SPLURGING WITH YOUR TAX RETURN

It may be tempting to run out and spend your tax return money on that newest piece of tech, or a pair of cute shoes, but this money should really be invested back into your accounts. Put it into your emergency savings, use it to pay off your credit card, or invest it in your retirement account. There are many things you can do with this extra money that will benefit you in the long run.
 

4) NEGLECTING TAX PLANNING

Just like how you should know what your monthly expenses are, you should also get familiar with knowing what you’re going to have to pay for taxes. Planning ahead can minimize the chances of being surprised by certain payments or amounts.
 

5) NO EMERGENCY SAVINGS FUND

Emergencies happen unexpectedly and are almost always expensive. Having a bit of money put on the side can be the factor that stands between you and debt, as well as relieving some of the stress related to the emergency.

Having an emergency fund that covers at least a few months of expenses is ideal in case of situations like layoffs or health issues. To determine how much needs to be saved, look at your monthly expenses and decide how much would roughly cover at least a few months. Make sure to set up automatic payments so you’re not having to keep track of payments.
 

6) FORGETTING ABOUT INSURANCE

Putting out money every month for something so intangible can be difficult, but paying for insurance is like making sure you have rainy day savings—if something ever happens, the financial burden that’s relieved because you prepared for a possibility will make every dollar paid worth it. An important theme of financial planning is always preparing for the unexpected.

Make sure to regularly review your insurance plan and its details as well. As life changes, coverage needs also change. Plus, new plans and benefits often appear and keeping on top of your current coverage can help you take advantage of better options and lower costs. You’ll also be able to catch things like unused benefits and coverage gaps.
 

7) CO-SIGNING A LOAN

There can be very legitimate reasons for wanting to co-sign a loan, such as helping your child buy their first car. However, in general, doing so can be very risky because of the responsibility. If the other person does not make their payment, you’ll be responsible for paying the full amount. If they’re consistently late with payments, it can negatively affect your credit, which can be a long and difficult process to recover.
 

8) RECURRING EXPENSES

It can be easy to forget about recurring expenses, such as streaming services or gym memberships. However, reviewing these expenses can sometimes help you cut down on your payments. For example, you may have used a particular streaming platform frequently a year ago because of your kids. But now that they’ve moved out, it’s not being used nearly as much. Cancelling the subscription can save you a lot of money. Or a cheaper gym can still get the job done, while allowing you to save the difference.
 

9) FAILURE TO INVEST

It’s important to make your money work for you. Investing smartly can help your money build over time through compounding, generate additional income, and help you achieve your financial goals. Plus remember to diversify your portfolio.
 

10) LACK OF GOAL SETTING

Having clear financial goals and a plan can help you stay focused with your spending. Assess your financial situation and what you want your future to look like and then set up a strategy to meet these goals. Make sure your goal is specific, measurable, and attainable. This goal could be anything from saving up to buy a house or car, to building an emergency fund.
 

FOOTHILL IS HERE TO HELP

At Foothill Credit Union, we’re here to help you find solutions that fit your financial needs. We can help you simplify debt with a balance transfer, explore loan refinancing options, help you access funds through your home’s equity, and much more. Reach out to Foothill Credit Union today to take the next step toward a healthier financial future!