Six Financial Mistakes to Avoid in 2014 (Part 1)

December 19, 2013

Investing in your savings and sticking to a monthly budget are two things you can do to improve your finances in 2014.

Investing in your savings and sticking to a monthly budget are two things you can do to improve your finances in 2014.

With the New Year rapidly approaching, many people may be taking a critical look at their lives and thinking about some of the changes they may want to try to make in 2014. While some people will be focused on getting into better physical shape, others may want to get into better financial shape, particularly if they are buried in debt and paying an excessive amount of money in interest. The following presents the some of the most common financial mistakes that get people into serious debt and what you can do to avoid them in 2014:

  • Mistake #1 – Not having an emergency savings fund: Although putting money into a savings account every month may not be a thrilling or sexy idea – especially if there is some new item that you would rather buy, it’s crucial that you budget even at least $20 per month to put towards a savings account so that you can starting building an emergency fund. You may even consider having your bank automatically make this monetary transfer each month so that it becomes part of your routine. Over time, this continued investment will slowly accumulate into a substantial financial cushion.

    Having a savings can serve as a financial safety net that will be essential if you need a large chunk of cash for an unforeseen medical bill, car repair bill or some other expense. Without this savings, you may be forced to take out an expensive line of credit or, worse yet, turn to a cash advance option, and both of these options can leave you struggling to get out of debt for months (or even years) to come.

  • Mistake #2 Not having a monthly budget: Creating and sticking to a monthly budget can help ensure that you have enough money each month to cover your necessary expenses while preventing you from spending your hard-earned money on frivolous things. To develop and effective monthly budget, make sure that you catalog all of your essential monthly expenses; this should include your:
    • Rent or mortgage payment and other living expenses (such as your utility bills)
    • Car and insurance payments
    • Food and gas bills
    • Credit card or loan payments.

Once you add up the total costs of such essential monthly costs, you can figure out how much disposable income you have left over to invest in your savings (or to occasionally splurge on a luxury item – like a fancy dinner out). If you stick to your monthly budget, you will avoid spending more than you make each month, which can help prevent you from accumulating additional debt in the New Year.

For more tips on what you can do in 2014 to get in better financial shape, be sure to check out the upcoming Parts 2 and 3 of this blog.

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