The world today revolves around the almighty dollar. On a broad spectrum, money is the dominant factor in determining the health of our national economy. From a more individual perspective, however, spending and saving habits are a reflection of your personal financial health.
Monetary issues cause a litany of problems among individuals and families. A lack of money can lead to unpaid bills, the inability to plan properly for the future, and added stress in your daily life. In addition, financial problems are one of the leading factors in divorces in the United States.
This all sounds pretty bleak, right? It would seem, then, that more money would lead to fewer problems. While it certainly is not as definitive as that, it is clear that lower stress levels from finances can lead to lower stress in other areas of your life. So, what is the solution?
It seems obvious: If you want more money, find a higher paying job or start a new career. Unfortunately, that is not the reality for many people due to either a lack of experience, education, or availability of jobs in a given market.
A second and more immediate solution is to look at your budget and see where you could be wasting money without even knowing it. Whether you are spending on unnecessary things or overlooking the fact that your insurance has hidden fees to watch out for, knowing your budget inside and out is important.
Whittling down unneeded spending will put extra money into your bank account to use on things you deem as more important. Here are some common mistakes you might be making without realizing it.
#1 – Paying Too Much for Insurance
Insurance can be expensive, especially when you consider that you may have different policies for life, auto, home, etc. While all of these might be necessary for you or your family, it doesn’t mean there are no options for you to reduce your cost.
One way to do this is to shop around. Oftentimes, people are tempted to go with the first policy they come across, or the one that has the easiest sign-up process. Extra time and research can be very worthwhile in finding coverage that meets all of your needs and is less expensive than other options.
Take your time when selecting your insurance provider and coverage that is right for you. You don’t want to compromise the quality of your coverage, but you can find the right policy and price by taking a look at your options.
Money may not buy happiness but most people would rather spend it on an activity, or something that adds value to their lives, than insurance.
#2 – Using the Wrong Credit Card
Points. Miles. Fees. Cashback. Using credit cards is no longer as simple as borrowing against your approved line of credit and agreeing to pay the money back later. Not only do we have different companies that offer credit, but there are countless different card options within each company.
There is nothing necessarily wrong with simply using your credit card and paying your bill at the end of the month. This can help you build your credit score, which has a positive effect on your financial health and can even impact things like your auto insurance rates.
You could, however, be wasting money by missing out on earning money or paying lower fees if you have the wrong credit card.
Finding the best credit card for you means looking at your current lifestyle and future goals to determine your needs. If you like to travel, picking a card that rewards your purchases with miles is a worthwhile choice. If you like to shop, a card that earns you points toward gift cards or purchases at other stores is a great option.
At the end of the day, if you don’t know what your future needs are, a cashback card could be the best choice for you. There are many of these cards that do not have fees (which is something you need to watch out for) and allow you to earn cash back percentages just for using the card like you normally would.
#3 – Forgetting About Subscriptions or Memberships
Magazines that you no longer find interesting, streaming music services that you never listen to, the jelly of the month that you never care to taste. These are all examples of recurring payments that might be made before you remember to cancel your subscription.
Automatic payments for things like utility bills or cellphones are one thing; those are items and services you use regularly and need to pay for. More frivolous items, however, often have recurring payments that are easy to forget about. Worst of all, you probably don’t use the product or service you’re paying for.
The best thing to do is to take an in-depth look at your bank account and see exactly where your money is going every week, month, or even year. Different types of subscriptions might require different payment frequencies, so staying on top of your budget is important. It can even be useful to use a money or budgeting app to help you keep track.
#4 – Overlooking Generic Products
Brand name items are exciting. We see commercials for them on TV, we form opinions on their quality before even trying them, and we are convinced that we’ll be satisfied when we buy them. The problem is that brand names normally cost more.
Now, I’m not suggesting you give up quality in order to pay a lower price. What I am saying, however, is that generic versions of a product are often equally as good or effective and come at a lower price point.
Many medications make an excellent example. Let’s say you are looking at allergy medication. If you look at the ingredient list, you are likely to find the active ingredient is the same in both a brand name and a generic alternative. Essentially, you will relieve your sneezing and itchy eyes with either medication, but the generic option costs less.
Food is another great example. Some foods like pizza or ice cream may have a more distinct flavor, so paying for the brand name is worth it. When shopping for ingredients or spices that will go into making a meal, however, generic or store brands may offer cheaper alternatives that do not change the flavor of your dish.
From Wealth Waster to Savvy Spender
Sustainable financial health takes more than pinching pennies and clipping coupons, but curbing the ways you are unknowingly wasting your money is a great start. It may take a little digging but once you take a close look, you are likely to find plenty of areas where you can save.
When you avoid unknowingly spending money, you can take the burden off other areas of your life. Having extra money may be one key to a more successful relationship, a more manageable way to set up a college fund for your kids, or a higher contribution to a retirement account.
What you choose to do with your savings is completely up to you, but there is no doubt that more money gives you more options and opportunities. By analyzing your spending habits, you can put money back into your pocket and take advantage of your newfound possibilities.
Dan Chojnacki writes and researches for the insurance comparison site, TheTruthAboutInsurance.com. He holds a degree in business administration and economics from the University of Wisconsin Green Bay.