Advertising
Advertising

7 Money Mistakes Even Good Savers Don’t Know They’re Making

7 Money Mistakes Even Good Savers Don’t Know They’re Making

Saving money can be tough, even if you’re not known to be a spender. It seems that there is always someone, somewhere who is trying to keep us and our money far apart. Sometimes, it’s even the bank we’re keeping our money in that’s actually keeping us from saving more.

Obviously, having a little money saved can be helpful for the proverbial rainy day. Having a lot of money saved is even better — particularly if you lose your job or have an unexpected emergency expense. Whether you have a lot of money saved or just a little, you might be surprised at some common mistakes even the best budgeters make.

Here are seven of the most commonly made money-saving mistakes and what you can do about them:

Advertising

1. Saving what’s leftover

It’s Friday and you just got paid. You head to the grocery store and maybe pay a few bills. Perhaps you had your eye on a new pair of shoes or the kids need to have karate classes paid for. After spending what you need to, you save the rest. Believe it or not, saving what’s leftover is actually a big mistake. It can lull you into a false feeling of security and make you think you have more to spend than you do.

Instead, pay yourself first. It’s important to budget out each of your paychecks and determine a percentage or amount that can go into savings first. Taking that money right off the top means you can spend what’s left.

2. Linking your checking to your savings account

This may seem like such a smart idea because you can easily transfer money from your checking to your savings account. But what happens if you accidently overdraw your checking account and your bank dips into your savings for you — making you think you have more money than you have? Or how often is it just easier to grab the cash out of savings to keep the checking account up to date. It happens more often than many of us would like.

Advertising

Instead, keep your savings account completely separate from your checking out. If you’re serious about saving, don’t even get an ATM card for that account. Make it more difficult to access that money. So, if you need it, you’ll have to go into the bank and fill out a withdrawl form — giving you the time to consider just how important withdrawing that money is.

3. Putting your savings in one pot

It’s fun to watch your savings grow as you put into one account. But is it really doing you the most good in one pot? Probably not. In fact, putting all of your savings in one account can be deceiving because you might think you have more money available to you for extra purchases than you really do.

Instead, go over the different things you are saving for. Make separate accounts for your emergency fund, down payment for your new house or car, vacation savings and new appliance saving. This way, you can prioritize where your money goes and watch each account grow separately. That doesn’t mean you should make up 40 different accounts for different things. Be specific, but not too specific and make a miscellaneous account if that helps with you with those smaller, extra purchases.

Advertising

4. Saving the windfalls

If you only save big chunks of money, then you might have no problem at all borrowing it all back. It’s important to save some of a large windfall, but it’s also important to save day to day cash too.

When you get a large amount of money, budget it in just as you would your paycheck. Save a percentage of all of your income and use the rest to pay down debts, bills or other expenses.

5. Save as much cash as possible

Do you feel like it’s important to have as much cash on hand as you can? You’re not alone. But remember, if you only save the cash, you won’t be able to take advantage of compounding interest in the form of CDs, bonds, savings accounts or whatever other form you prefer.

Advertising

Instead, keep some cash on hand, safely, but diversify and get your savings working for you.

6. Not keeping track of money leaks

Once you get comfortable with how much cash you have on hand and have coming in, we often feel better about spending a little here and there — giving our kid $20 for a movie, buying a few drinks at the convenience store on our way out of town, donating to this fundraiser or than charity event. These are good things. But not if that means you suddenly have no idea where the money is going.

Start keeping a little notebook in your pocket or in your car. If you have a smartphone, create a note and use that. Start writing down everything you spend money on — including the library book fines and the change for the newspaper at the gas station. Keeping track of where your money goes will illustrate to you what’s important and what you should be budgeting for.

7. Not checking credit reports

You have a perfect credit. You know it. You have a perfect score and are never denied anything. Or so you hope. On the flipside, maybe your credit is so bad that you don’t even care anymore because you never apply for any credit anyway. It doesn’t matter. Either way, not checking your credit on a regular basis is a mistake. In this day and age of smart phone purchases and identity theft, it’s imperative to check your credit report and the score at least once a month. Make a note of anything you don’t recognize or don’t understand and make the calls necessary to understand or fix it. Even small things can become big when it’s time to apply for a home loan or sometimes even get a job.

More by this author

Michelle Kennedy Hogan

Michelle is an explorer, editor, author of 15 books, and mom of eight.

8 Things to Remember When You Don’t Know What to Do with Your Life 30 Fun Things To Do With Your Friends Without Spending Much 10 Benefits of Deadlifts You Probably Never Knew 9 Benefits of Jumping Rope You Probably Don’t Know 9 Signs It’s Time to Quit Your Job

Trending in Money

1 How to Use Credit Cards While Staying Out of Debt 2 How to Use Debt Snowball to Get out from a Financial Avalanche 3 How Personal Finance Software Helps You Get More Out of Your Money 4 The Best Ways to Save Money Even Impulsive Spenders Can Get Behind 5 How to Answer the Tough Question: What are Your Salary Requirements?

Read Next

Advertising
Advertising
Advertising

Last Updated on March 4, 2019

How to Use Credit Cards While Staying Out of Debt

How to Use Credit Cards While Staying Out of Debt

Many people will suggest that the best thing to do with your credit cards during these tough economic times is to cut them up with a pair of scissors. Indeed, if you are already in huge debt, you probably should stop using them and begin a payback strategy immediately. However, if you are not currently in trouble with your credit cards, there are wise ways to use them.

I happen to really love my credit cards so I will share with you my approach to how I use mine without getting into deep financial trouble.

Ever since about 1983 when I got my first Visa card, I continue to charge as many of my purchases as possible on credit. Everything from gas, groceries and monthly payments for services like my cable and home security monitoring are charged on credit. Despite my heavy usage, I have maintained the joy of never paying any interest fees at all on any of my credit cards.

Advertising

Here are some tips on how best to use your credit cards without falling into the trap of paying those nasty double-digit interest fees.

Do Not Treat Credit Cards as Your Funding Sources

Too many people treat their credit cards as funding sources for major purchases. Do not do this if you want to stay out of trouble. I use my credit cards as convenient financial instruments so I do not have to carry around much cash. In fact, I hate carrying cash, especially coins. When you buy things on credit, the purchases are clean and you will not get annoying coins back as change.

I do not rely on my Visa, MasterCard or American Express to fund any of my purchases, large or small. This brings me to my golden rule when it comes to whether I will pull out any of my credit cards either at a retail or online store.

Advertising

I never purchase anything with my credit cards if I do not have the actual cash on hand in my bank account.

If I really cannot pay for the item or service with cash that I already have at the bank, then I simply will not make the purchase. Remember, my credit cards are not used as funding sources. They are just convenient alternatives to actual cash in my pocket.

Make Sure to Always Pay Off Balances in Full Each Month

The next very important part of my overall strategy is to make absolutely sure that I pay the balances in full each and every month no matter how large they are. This should never be a problem if the cash has been budgeted for my purchases and secured in the bank. I have always paid my full balances each month ever since my very first credit card and this is why I never pay interest charges.

Advertising

Using Credit Cards with Rewards

Most of my credit cards are of the “no annual fees” type, including one MasterCard on a separate account I keep at home as a spare in case I lose my wallet or incur any fraudulent charges. However, I do use a main Visa card which does have an annual fee because all purchases on that card reward me with airline frequent flyer points. For me, the annual fee is worth it since I do travel and I get enough points to redeem many free flights.

You have to decide for yourself if you will charge enough purchases on credit each year without paying interest charges to warrant a credit card that rewards you with airline points (or other rewards). In my case, the answer is “yes” but that might not be the case for you.

I occasionally use a MasterCard or American Express card on small purchases just to keep those accounts active. Also, I have been to the odd retailer that accepted only a certain type of credit card, so I find that having one from each major company is quite handy. Aside from my main Visa card which earns the airline points, the rest of my cards are of the “no annual fees” variety.

Advertising

So this is how I use my credit cards without getting into any financial trouble with them. This strategy is recommended only if you are not in debt, of course. In fact, it is worth keeping in mind once you’re out of debt so that you can keep your credit cards active and treat them responsibly.

What are your credit card usage strategies? Let me know in the comments — I’d love to hear what methods you use.

Featured photo credit: Artem Bali via unsplash.com

Read Next