All of us have habits that increase the money we spend. Some of these habits can be changed. And, if successfully changed will make more money available to save and invest for our future.
Here are five common ways money is falling through your fingers:
The first two mean that you’ll have less money to meet your needs in the future.
1 - Not enrolling & maximizing your 401(k). If you have a 401(k) at work you probably already know how important it is to at least put in whatever amount entitles you to a company match. For some this is as low as 3%. Basic rule of thumb is to put away 10% or more of each paycheck before you can even touch the money.
2- Not opening or maximizing an IRA. Not everyone has a 401(k) or 403(b) benefit at work. Even if you do, you should also open an IRA. They come in two flavors — Traditional and Roth — and allow you to save and invest.
The next two are some common “money sinks” in daily life:
3 - Spending too much dining out. If you think groceries are expensive, consider the costs of dining out. There are the immediate costs: the food/drinks, tipping the service, possibly parking or travel costs. A much wiser move is to plan for the week’s meals and get yourself to the grocery store. If you pack your lunches and just allow for a Friday or Saturday night meal out you’ll reduce this common money pit.
4 - Spending for wants instead of needs. Everyone has their own version of “wants” versus “needs”. Here’s an easy way to decipher the difference. A need includes food, shelter, childcare costs, health expenses, and debt management. Everything else is a want.
5 - Paying too many fees. Fees are everywhere. The worst ones to pay are the ones that can be avoided if you had been better organized, better disciplined, or better prepared. Cash flow plays a big role in avoiding or causing fees so make sure you’ve organized your cash flow with a budget. Join Geezeo if you need help creating a budget.
So, remember these five “biggies”. Work to correct all five and you’ll be ahead of the game.
