7 Common Mistakes You Make When Trying to Save Money

7 Common Mistakes You Make When Trying to Save Money

Saving money is hard. Our entire economy is designed around people spending money, so when you are trying to save, it often feels like you are fighting against all of society.

But having a healthy savings account is important. Living paycheck to paycheck is stressful, of course, especially when you run into an extra expense that you didn’t plan for. That’s why having an emergency fund is so important. But you can’t build an emergency fund if you’re spending your entire paycheck every month.

But how do you go about saving money? It’s not the sort of thing that you can do solely through will power. Much like losing weight, saving money comes from a lifestyle change. While it’s reasonable to expect the new budgeting process to be a bit rocky as you get started, you want to avoid actively sabotaging your new budget with poor choices right off the bat.

Big savings may mean big changes. Get started by removing these common obstacles before they throw you completely off track.

Don’t Lie to Yourself about Your Budget

It’s easy to make a budget if you are working with fantasy numbers. Are you spending $500 per month on eating out and online shopping? Are you really going to cut that down to $0 overnight? Be realistic and don’t lie to yourself. Budgeting won’t work with fantasy numbers out here in the real world.

Hide Your Debts from Yourself

You can’t save money if you lie to yourself about how much you spend. You also can’t lie to yourself about your debt. Be honest and thorough with your debt. Find all of your credit cards. Total up all of your loans.

How much is the minimum payment on each? How much will those payments be when the introductory interest rates run out? You can’t create real savings without a real picture of your starting point. It can hurt to look at it all in one place, but it’s the kind of hurt you need to save money correctly.

Throw Your Money Away on Fees

Are you banking in the right place? You may not be if you are paying monthly fees every month. If you’re paying fees for a checking and savings account, you are wasting money that you could be saving. Changing banks may be worth it if you can save money every month on fees and charges. Don’t waste your money making a financial company profitable. Look for less expensive options for your banking.

Pay Ridiculously High Interest Rates

The interest rate on your credit cards and loans adds up fast. You might be surprise to realize you’re paying hundreds of dollars every month in the interest rates on your cards. Taking out a personal loan with a lower interest rate can pay off the expensive debt and give you a single monthly payment to clear it all up. Just be sure you don’t use the credit cards again when they are clear or you’ll wind up owing twice as much.

Guess Your Monthly Spending

How much did you spend on gas last month? How much did you spend on clothing or automotive maintenance? Your personal finance success depends heavily on tracking your spending. If you are guessing at how much you are spending every month, you’re going to be wrong. And if you are guessing low while your spending is running high, you are going to be shocked every month when you go way over budget.

You can track your spending in lots of ways, but some of the easiest are apps that can connect to your bank and credit cards to show you how much you’re spending in different categories of your budget so you can stay right on track.

Wait to Save

Are you waiting to start saving? A lot of people plan to save, but they are waiting until they have enough money. How much is enough? Really it’s any amount. Only have $20 left over in the budget right now? Save it. That $20 per week will add up to more than a thousand by the end of the year. Any amount of savings is good savings, so if you can only start with $10, start with $10. As you get more savvy with your personal finance numbers you can bump that savings number up to make your money grow even faster.

Save Last

Your first step to building a savings account is to put your savings last. If you’re trying to clean up finances, you may not have much choice when it comes to your set payments on debt, rent or mortgage and car payments, but once you figure out how much is going out monthly in set payments, pull off the top for your savings and distribute the rest.

Reduce your entertainment, groceries and gas money by $20 every week and you’re looking at an easy $60 per week to put into savings. But if you think that $60 will be sitting in your bank account after you’re done having fun every weekend, you’re going to be disappointed. Move the savings out first and then start spending. It’s the only way to guarantee that it won’t “accidentally” get spent.