Four Money Mistakes You Can Learn From

Great article from www.360FinancialLiteracy.org

It's hard to know when the economy will truly recover, although there are signs that things are headed in the right direction. But if you want your own finances to stabilize over the long term, you'll need to evaluate what you've been doing right, and wrong. There's no magic bullet, but avoiding these four money mistakes may help you survive and ultimately thrive in any turbulent economy.

Mistake 1: Expecting things to stay the same

It's a familiar tale. Economic times were good. The stock market went up, up, up. Home values (and real estate prices) soared, credit was flowing, and the job market was robust. And then the bottom fell out.

At the heart of all economic bubbles is the euphoric, yet ultimately mistaken, idea that the good times are here to stay. And when the economic news is bad, it's just as easy to assume that the tough times will remain. But your own financial recovery will ultimately depend on you not jumping on any bandwagon. Instead, take a proactive, rather than reactive, approach to financial planning, no matter what economic news you're hearing. Prepare yourself for a variety of financial scenarios and avoid basing money decisions on emotion, or you may find yourself making the same financial mistakes over and over.


Mistake 2: Only saving your leftovers

Do you worry that you're not saving enough? Do you routinely rely on credit rather than cash to pay for the things you want or need? Rather than blame your financial inertia on your income, look a bit deeper, because the real culprit may be the lack of financial priorities. If you don't know exactly how you're spending your money and you haven't set financial goals, it's unlikely that you'll see much financial progress.

Go back to basics by preparing (or reviewing) your budget. If you tend to save only what you have left over every month, you can put yourself on a more disciplined course by having a fixed amount taken out of your paycheck automatically for retirement. Or, you can set up automatic transfers from your checking account to a savings or investment account.

Mistake 3: Not having an emergency fund

One of your savings priorities should be an emergency fund. An emergency fund isn't glamorous, but this underappreciated work horse really pulls its weight during hard times. Having cash on hand that you can use for an unexpected expense, or to pay bills if you lose your job or become disabled, is vital because it can help you avoid having to rely on credit or tap your retirement savings. Without emergency savings to fall back on, worse financial trouble may lie down the road.

Mistake 4: Not asking for help

Even if your finances are in good shape right now, you may be overdue for a checkup. A close look at your financial plan will help you identify potential strengths and weaknesses. If you're already in financial trouble, don't let fear or shame prevent you from asking for help. Facing financial problems early may help you make a full recovery. Many creditors are willing to work with you, but this may be much easier while your credit is still good, and while you still have time to turn things around.


The 360 Degrees of Financial Literacy Web site offers general information for managing personal finances and does not recommend specific financial actions. For financial advice tailored to your situation, please contact an expert such as a CPA or a personal financial advisor