Most of us have high hopes for a better financial situation this year. For some, that may mean saving more; for others, landing a better-paying job; and homeownership is still the American Dream for most families.
But before we can tackle this financial Bucket List and move forward, it’s important that we identify the money mistakes that we’re making that are continuously setting us back. We’ve identified 15 things that are common among the average American consumer, causing them to always be short on cash!
So, if you want this year to be your best yet for your finances and finally turn around your money mistakes, stop doing these 15 things!
In part one of this blog we covered the first seven things to stop doing if you don’t want to be broke, and here are the next eight:
- Not improving your credit score
Your credit score dictates so much about your financial picture, from credit card interest rates to mortgage payments, student loans to auto financing. But it also influences your insurance premiums, utility bills, and can even prevent you from getting a new job!
In fact, it’s estimated that for every 20 points you improve your credit score above sub-prime, you’ll save an average of $10,000 in interest and payments over the course of your life as a consumer!
The first step to improving your finances is always to take account of your present situation, so contact us for a free credit report and consultation!
- Not educating yourself about finances
Should you lease a car or buy it? What’s the best home loan for you? Should you be investing your money first or paying off your existing debt? From saving for retirement to healthcare options, choosing the right credit card to filing your taxes correctly, we can all stand to learn a lot about money.
However, too many people neglect to educate themselves when it comes to financial matters. Even worse, they often make critical financial decisions based on rumors, advice from their “expert” neighbor, or water cooler talk from coworkers. In fact, the average person spends much more time planning their vacation every year than they do planning for retirement!
Instead, empower yourself and make sure you have the best information to build a strong financial future by reading articles, credible blogs, books, and watching personal finance videos. You’ll be amazed what you learn in a very short time!
- Renting instead of buying a home
Home ownership is still the American Dream, and for good reason. In fact, there are a wide range of benefits to owning your own home instead of renting, from social, community involvement, family and, of course, financial advantages.
When you have a fixed rate mortgage, your monthly payment will never go up, but you’ll actually being paying it down to $0 over the years, owning your home free and clear. But when you rent, the monthly price can and will go up periodically, and you’re amassing no equity, no appreciation when the value goes up, and don’t even get tax advantages.
Studies show that the average homeowner has a 3.5x higher net worth than the average renter, as well as more savings, more funds for retirement, and pay less in total taxes. Their children are also more likely to do better in school, more likely to graduate from college and enjoy a much more stable and happier home life.
These days, with mortgage loans that are geared towards first-time buyers that require low down payments, there’s really no reason NOT to buy!
- Not planning for the future
Do you enjoy going to work every day, working long hours, coming home exhausted, and still only bringing home enough to live on until the next paycheck?
Well, get used to it, because many of us will be working way past traditional retirement age, or even well into their senior years. There’s no denying that Americans aren’t putting enough away to retirement comfortable any 65 (or anywhere close!). In fact, 40% of the workforce have nothing saved for retirement, and 60% aren’t on track.
But here’s the good news – you still have time to save, and the time-value of money dictates that the earlier you start investing, the faster your money will grow. So make sure you deduct the maximum retirement savings form your check, definitely take advantage of any employer matching, and focus on savings and acquiring assets that produce cash flow – not racking up debt and liabilities. You’ll thank me once you can retire on schedule!
- Straight up wasting money
New polls show that we have learned our lesson from the past recession. In fact, 55% of households are still spending more than they take in every month (the difference made up in debt), and our personal savings rates are at a rock-bottom 2.2% annually.
Of course, many of our costs – from rent to health care to food – have increased sharply over the last few years, so it always feels hard to get ahead. But we’re still spending – or wasting – money on a ridiculous list of things that show that we’re living well above our means.
Sure, the average person has a closet full of new clothes they hardly wear, but we’re even talking about things more substantial. For instance, it’s estimated that Americans spend $443 billion every year in wasted energy bills, with most people overpaying by a whole one-third!
And we’re all eating out at restaurants and on the go WAY too much, which is costing us.
The average American household now spends $6,759 on food every year but $2,787 of that total is for meals in restaurants or outside of the home. We also spend an average of $1,200 on fast food every year – or $117 billion!
We also spend $65 billion on soft drinks and $11 billion on bottled water every year, we dump countless billions gambling, and this one will blow you away: the average cigarette smoker puffs away 14% of their total income on cigs every year, which adds up to about $80 billion, or 1/7 of our total discretionary income budget!
Stop wasting your money on things you don’t need – and won’t even miss!
- Paying too much for your car loan (not your car)
Of course, we all need transportation to get to and from work, school, and home. And transportation costs actually remain reasonable, with low gas prices and car buying easier than ever. In fact, it’s not the cost of cars that’s eating up our budget, but the high price of the financing we’re using to purchase them.
In fact, the average monthly payment for a new car is now almost $500, as the typical car shopper is financing $28,524 at 16-28% interest rates over terms of 73 to 84 months! Ouch!
So before you go shopping for a car, talk to Nationwide Credit Clearing about improving your credit score so you’ll qualify for a better auto loan. Then, you’ll be free to purchase that fantastic new car – on your terms!
- Paying late
It’s hard enough to manage our finances and get ahead without choosing to spend more, but that’s exactly what we do when we pay our bills late.
In fact, about 1 in 4 U.S. adults don’t pay their bills on time, and only half of 18 to 34-year-olds do so. When we pay late, whether it’s a credit card, a phone bill, or our rent or mortgage, we get hit with unnecessary late fees.
The typical American pays $250 each year in late fees just to their bank! So always pay on time if you don’t want to be broke!
- Getting whacked with unnecessary fees and charges
Likewise, overdraft fees, ATM fees, and other extraneous fees from financial institutions are really putting a dent in our wallets. Banks charge their own consumers an average of $412 in overdraft fees every year, adding up to about $33 billion annually!
We also pay about $329 per year in ATM fees, and they’re often tacking on charges just for doing business with them on many checking and savings accounts! Make sure to read the fine print and pay attention to how much you’re wasting in fees!
Improve your finances this year starting with a free credit report and consultation from Nationwide Credit Clearing!