Are You Making These Common Finance Mistakes?

John J Bowman Jr Accountant - Personal Finance Mistakes

It happens every month without fail. When payday rolls around on the third Friday of the month, your bank account looks healthy – filled with money to spare, even. With a few easy taps on your banking app, you’ve sent off your rent, covered your electric bill, and paid off a little of your credit card debt. You decide it will be alright if you splurge a little on dinner, a movie, a maybe even a quick weekend trip to the local shopping center. A week or so later, you absentmindedly swipe open your banking app – and stare in disbelief. Your bank balance is practically anemic. Where did all of your money go?

 

Spending Impulsively

Your morning Starbucks latte could be costing you. Crunch the numbers: a venti latte costs roughly $4 a pop. If you multiply that times the five days in a work week, you find yourself with a coffee bill of $20 a week, or a full $80 a month. In other words, the money you spend on coffee alone could have covered your entire grocery bill for a month. Small expenses add up – so avoid making impulse purchases. If you think you might be splurging just a little too often, check! At the end of the month, compile all of your card charges and assess how much you spent on necessary items or services (i.e., rent, food, gas) versus how much you spent on unnecessary treats or luxuries. You might just find yourself reconsidering your coffee budget afterwards.

 

Paying Too Many Subscriptions

Do you really need Netflix, Hulu, Amazon Video, and HBO Go? Probably not. Signing onto a service may seem simple and cheap when you’re in the free trial period, but those monthly fees accumulate quickly. Do an inventory of the subscriptions you have and decide which ones you can afford to cut ties with.

 

Living on Credit

Having a credit card doesn’t give you access to free money! Credit card companies make their enormous profits off of people who make minimum payments and allow interest to accrue. Just think – by leaving the expense of a single small item on your balance, you could end up paying out twice the original price in interest and fees. Believing in the “free money” myth could cost you money; living on credit could leave you bankrupt.

 

Overspending on Housing

You may want the in-building gym or slickly designed kitchen – but can you afford it? According to a report from Harvard’s Joint Center for Housing Studies, over one-third of all American households spend 30% or more of their take-home pay on housing expenses. Most financial advisors set the expense ceiling for rent at 30% of a person’s take-home pay; however, even this might be too high for someone struggling to pay off hefty student loans or provide for a family. Don’t let a nice apartment or charming home lure you deeper into debt. If you do, you might find yourself needing to sacrifice your personal life and stay home far more than you ever wanted to.

 

“Keeping Up” With Others

If all of  your friends leapt into crippling debt, would you follow? The answer might not be as easy as you think. Sometimes, it can be difficult to say no to a weekend trip or fancy dinner – even if you know that the expense would eat into your budget for the month. Make a habit of thinking your budget first, and fun second – or risk losing out on a significant chunk of potential savings.

 

What is Cryptocurrency?

Most people have heard of Bitcoin, but have no idea what it is or how it works. Bitcoin is a form of virtual or digital currency known as cryptocurrency, which uses cryptography or code to keep transactions secure. Cryptocurrency introduced a new type of currency on a software structure.

What Is The Origin Of Cryptocurrency?

Satoshi Nakamoto was the originator of bitcoin, and release the original version of the Bitcoin software in 2009. The open source worked on the software for two years, when Nakamoto presumably moved on to other projects. There’s a lot of speculation about who Nakamoto actually is, but it may remain a mystery.

How Does It Work?

Cryptocurrency is real money in a digital a form of payment similar to secure, online e-commerce payment processors to pay for goods or services. A lot of companies involved with cryptocurrency issue tokens that are their form of currency that is similar to tokens in an arcade. Actual money is exchanged for the tokens. The new form of currency is so popular that there are more than 1,400 cryptocurrencies that are used for online trade. According to statistics, all cryptocurrencies currently in use have a value of approximately $708 billion. Bitcoin, the leader in cryptocurrency, has a value of $283 billion.

What Is The Blockchain?

The blockchain is the database that’s compatible with cryptocurrency. The way the blockchain differs from a traditional database is that the data can be stored on thousands of computers in locations around the world. Since the data is on so many systems, the cost is much lower than with a traditional database. Due to the encryption, if part of the data is compromised, the entire database isn’t exposed.

What’s the Attraction Of Cryptocurrency?

1. Many people are using cryptocurrency because they see it as the currency that everyone will be using in future generations. They’re buying the currencies now because they speculate that it will be more valuable in the future.

2. Inflation is another reason that people are using cryptocurrency. When banks manage the supply of money, it tends to decrease in value during periods of inflation.

3. Some cryptocurrency supporters like the idea of the blockchain, the system that cryptocurrencies use. The theory is that the blockchain is more secure than more traditional systems used for processing monetary transactions.

4. Some cryptocurrency users prefer the idea of conducting financial transactions without government interference.

5. Some financial speculators aren’t interested in using cryptocurrency because they’ll be more widely accepted for financial transactions in the future. The belief is that the currencies will soar in value, so they’re buying them know before the prices drastically increase.

Finance Tips For New Parents

One of the most important things you can do before your baby is born is prepare a financial checklist. Raising a child is expensive, so the more preparation you do the easier the experience will be. You’ll also save more money than you would have without a plan. Below are some of the top financial tips that new parents should use when creating a checklist.

Research Health Insurance

Even with health insurance, the fees associated with baby care can add up. Do research so you know what sort of fees to expect with labor, delivery, and prenatal visit. If you estimate how much the medical bills will cost, you won’t be surprised by the final bill.  

Maternity and Paternity Leave

Does your company offer maternity or paternity leave? Do you know how many days you are allowed to take? Do you get paid during the entire period? These are the type of important questions you need to ask. If you take off for an extended period of time, and your company doesn’t provide payment, your finances can be seriously impacted.

Prepare A Baby Budget

After you estimate healthcare costs and understand your leave situation, make a budget. Your budget will guide you as you purchase necessary items. It can also help prevent you from purchasing unnecessary items. If you’re particularly budget-conscious, don’t hesitate to purchase used items. Your budget should also include estimates for the monthly costs associated with diapers, food, etc. The more budget planning you do before your baby is born, the better.

Find A Pediatrician

In order to save money, it’s important to choose a pediatrician that’s within your insurance network.  Ask friends and family members for recommendations. Also, don’t be afraid to interview potential candidates.

Start An Emergency Fund

Whether you’re a parent or not, emergency funds are a financial necessity. However, they’re especially important for parents since children are prone to accidents. As a parent, you never know when you’ll need extra funds to pay for an unexpected expense.

Health Insurance For Your Child

Add your child to your health insurance as soon as possible. Most health insurance policies give parents thirty days to add their child to a policy. The last situation you want is for your child to be sick and uninsured, so take care of this step right away.

Start Saving For Education

Every year the price of college tuition rises, so it’s never too early to start saving for your child’s education. Consider starting a 529 plan. It will allow you to save money and avoid taxes.