If meeting your budget goals always seems to be a challenge, it may be time for a spending analysis to see exactly where your hard-earned dollars are going.
Going over budget month after month or turning to credit cards to manage everyday expenses are just a few warning signs of financial trouble ahead.
Identifying gaps in your budget will require an honest look at your spending habits and give you a chance to identify (and more importantly rectify) some money mistakes you may have made in the past.
Here are five common, costly money mistakes and how to avoid them.
#1: Overlooking hidden banking fees
Do you keep track of monthly banking fees and ATM fees? These extra costs just to manage your money can be easy to overlook but will add up over time. Even if it’s a few dollars a month, you need to track this as an expense somewhere in your budget.
Avoid costly mistakes by: Combing your monthly statements and / or calling your bank to find out if you are being charged any type of maintenance fees for your accounts or convenience fees for certain transactions. Determine whether you always seem to be paying overdraft fees and if so, set up overdraft protection to avoid charges in the future.
#2: Holding on to memberships or subscriptions you don’t really need
Whether it’s a warehouse club membership or an online service subscription, consider how much value those memberships and subscriptions really offer. If you’re paying for services or products that no longer serve you, stop making this an automated expense.
Avoid costly mistakes by: Do a personal audit to see which services and subscriptions you pay for actually add value to your life. Cancel those that don’t. Review cancelation policies so that you can get a refund for the remainder of your subscription or cancel at the right time to avoid extra charges.
#3: Buying items (just) because you have a coupon
Whether you’re a casual coupon user or an extreme couponer, buying products just because you have a coupon isn’t a smart purchasing decision. Stocking up on items that you never actually end up using is akin to throwing money away.
Avoid costly mistakes by: Only using coupons for items that you need or buy regularly and by taking the time to comparison shop when buying items you’ve never purchased before. When you are buying items that you use regularly, be on the lookout for coupons and seek out those items during a sale or promotional period for even more savings.
#4: Buying heavily advertised items
Whether it’s an infomercial, an announcement of a price drop via email or a direct mail piece, consider whether you would buy a heavily marketed product if you had discovered it on its own. Many purchases prompted by an advertising campaign end up being impulse buys and can leave you with a case of buyer’s remorse – and a lighter pocketbook.
Avoid costly mistakes by: Determining whether you really are in the market for the product and taking some time to comparison shop online and offline. Steer clear of impulsive buying decisions so that you have a chance to evaluate whether the product is something you actually want or need.
#5: Living without a budget
If you’re living a freewheeling financial lifestyle, you won’t have a fair idea of how much you actually spend each month. You may be setting yourself for costly money mistakes or even a financial disaster. Putting together a realistic budget will not only help you live within your means but can also put you back in control of your financial situation.
Avoid costly mistakes by: Drafting up a realistic budget and updating it at least once a month to make sure it’s accurate. If you’re just getting started, use a budgeting app or online programs and track your weekly and monthly expenses.
Do you a tip to help stay on budget? Do you have a personal financing pet peeve? Let us know in the comments below.
Stay tuned: Next week, we’ll be kicking off a special six-part series on creating a household budget you can live with, identifying and dealing with debt, understanding fixed and variable expenses and much more. Follow the Smart Money section of the Ting blog and follow along!