Financial Mistakes to Avoid for a Better Financial Future
While there are many ways in which the “middle class” is defined, the most common definition of a middle class person is based on his or her income level. According to a study conducted by the Pew Research Center, about 51% of Americans fall into the middle class category. Those families that have an income between $46,960 and $140,900 are considered middle-income or middle class families and there are many financial mistakes to avoid which are ignored generally.
These are the people who are actually the backbone of the country and drive its economic strength. People like teachers, professionals, workers, chefs, etc.
The challenge with being in the middle-class is that are problems with money that are constant. And while wages haven’t kept up with expenses, it is not always the economy that makes making ends meet a struggle.
Here are a few of the common financial mistakes to avoid which hinder us from having a better financial future:
- Too Much Debt
The biggest problem with our finances is the amount of debt we have. While there are times that taking out a loan is unavoidable, there are little things we can do to reduce our debt.
The first problem in financial mistakes to avoid is how much we use our credit cards. According to data from the Federal Reserve Bank of Boston, more than 65% people who owned a credit card had debts. Credit cards have huge interest rates. Just controlling our spending and being more disciplined about how we spend can make a huge difference in how we manage our debt.
- No emergency fund!
Another research study showed that 46% of Americans had no money for emergencies. As a rule of thumb, we need to keep at least 5 months’ worth of income as savings at all times – to be used only for emergencies.
If you don’t have these savings, then you can easily fall into a debt trap that is really, really difficult to get out of.
- Not thinking about retirement
Living life in the now is great, but you will stop working someday. And when that day comes, most of us don’t have enough to maintain the lifestyle we had while we were earning. Even worse, we may not have enough to survive on.
Struggling at any point in our lives is not pleasant, but struggling at the end of our lives is just terrible. So, if you want to have a comfortable, peaceful retirement, here are some tips on saving for retirement.
- Having a Health Saving Account
One thing that most of us overlook is using a Health Saving Account to our advantage. This is a tax-free savings account that is available to people who have high-deductible health insurance plans. You can use the money in your Health Saving Account to pay for medical expenses not covered by your insurance company. Things like dental visits, new eyeglasses or contact lenses take up money that could be used for other stuff or even saved.
- The Little Things matter
There are a lot of little things that we don’t pay attention to that add up and punch a hole in our finances. Simple things like saving electricity by turning off appliances or using energy efficient things, going for a cheaper cable plan, cleaning out the closet and selling things we don’t use any more, down-sizing, cooking at home – the list goes on and on. Here are 100 tips to save money for the future.
Every little bit counts towards building a future that is financially secure for you and your family.