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.

 

Top Finance Tips for First-Time Homebuyers

Buying your first home can be a stressful process. But it doesn’t have to be. The best way to eliminate stress is to do your research. If you do enough research then your home buying experience will be smooth and as stress-free as possible. Below are some of the top finance tips for first-time homebuyers.

What’s Your Credit Score?

Knowing your credit score is the first step to purchasing a home. Some people mistakenly believe that paying your credit card bill on time each month automatically means you will have a good credit score. However, you also have to consider how much debt you carry month-to-month in relation to your income. There are many free credit reports online that you can consider. Here’s a helpful list. Once you have your report you need to look it over to make sure there aren’t any mistakes. If your credit is damaged then you will need to repair it before searching for a home.

Know Your Budget

Before you can purchase a home you need to know where your money goes each month. If you are able to save money at the end of each month, then you are in a good position to purchase a home. On the other hand, if you live paycheck-to-paycheck the home buying process will be difficult. Mortgage lenders will look at your income in order to determine whether they will give you a loan or not. Therefore, it’s not a bad idea to create a budget and track your money each month. This will give you a better idea of how much you save each month, and it will help you eliminate unnecessary expenses.

Estimate Your Costs

One of the first steps to buying a home is determining how much you can afford to spend. Bankrate has a useful calculator that will help you determine how much money you can spend on a home. By entering your monthly income and things like your credit card bills, the calculator will give you a helpful estimate of how expensive of a house you can afford and the monthly mortgage payment you can afford.

Down Payment

The more money you can put down on a house the better. This is why it’s a good idea to create a monthly budget when you first start thinking about buying a house. Following a budget each month will help you quickly save for a down payment. Many lenders won’t even work with buyers who can’t afford to put down at least twenty percent of the home’s asking price. However, there are some programs that assist buyers who cannot provide enough of a down payment. Take a look at this site to learn more.

Top Personal Finance Blogs

One of the most sure-fire ways to guarantee wealth and security is to pay attention to your personal finance situation. The more you know about personal finance the more money you will save. You’ll also make better financial decisions in general. I recently came across a great resource that lists the best personal finance blogs of 2016. Here’s the link to the article. The list was actually voted on by readers, so the top site, Cash Cow Couple, is a site that a lot of readers recommend. There are many other sites on the list that are worth checking out too like Dough Roller and Mr. Money Mustache. All of the sites on the list are great for inspiring you to manage your money better.