Here are 10 financial fumbles that could be sabotaging your savings making it harder for you to reach financial stability and achieve long term financial wellness.
- Fumble # 1 – Your Mindset!
Thinking you have absolutely NO money to save is a fumble! Be sure you are thinking about your financial needs versus wants and that you are *not* elevating wants to needs. Most financial experts agree that you can be saving some money, even if a few dollars. Start small by saving change and considering fun action steps like the Penny Challenge. With the Penny Challenge, you save a penny on Day 1, 2 pennies on Day 2, 3 pennies on Day 3 and so on. By 365 days, you will have nearly $670!
- Fumble #2 – Paying Everyone Else FIRST
When you get paid, don’t wait until the end of the month or the end of your paycheck to see how much you have left to save. Instead, pay yourself *first* by automatically transferring a set amount of money to your savings account each payday. This action prioritizes savings and helps assure that you stay on track with your savings for emergencies, both short and long term goals, retirement and more.
- Fumble #3 – Unintentional Spending/Not Tracking Spending
If you are not managing your money, who is? Perhaps, no one. This is a risky situation to be in as we depend on money and income for our very survival. You need a spending plan (i.e., budget) to be sure you have a good plan for financing your life now and in the future. If you are not directing your money intentionally as to where it should go, you are also not honoring the time and effort it takes you to earn it.
- Fumble #4 – Competing with Others
Competition with others is not always a bad thing when we have the goal of improving ourselves (e.g., in sports, school) but competing with others in terms of material possessions can be very damaging to our financial wellbeing. Outward appearances can be extremely deceiving and people can get into a great deal of debt trying to impress others – everything from the shoes they wear to the car they drive. We don’t really ever know someone else’s full financial situation, so living within YOUR means and prioritizing and honoring your own financial goals is key.
- Fumble #5 – Not having savings goals
Research shows that people who have savings goals written down (or otherwise recorded) where they are very specific, are most likely to achieve them. Without goals, our income tends to evaporate into meeting needs and random purchases based on what we want in the here and now.
- Fumble #6 – Not automating your savings
Saving regularly can be a “set it and forget it” action. The easier you make the process, the more likely you are to continue it as a habit and this can have a big payoff over time! Also, you can make it intentionally difficult to withdraw your savings making it less tempting to do so. This really helps your money grow over time with compounding interest – where you earn interest on interest you have already earned! More to come on that!
- Fumble #7 – Saving money in the wrong accounts
To get the most out of your savings efforts, you will want to research the current interest rates offered at both banks and credit unions (go to bankrate.com), any fees, and special features that may be useful to you like overdraft protection or special savings accounts for children or college students.
- Fumble #8 – Pulling from savings for wants (not needs)
Many people don’t avoid the temptation of withdrawing from their savings account for unnecessary expenses. Because of this, their savings do not have the chance to really grow and gain the advantage of compounding interest. They also confuse what is truly a need in their life versus a want and they often elevate wants to needs. By waiting at least 48 hours before withdrawing from savings and reflecting on the withdrawal first, we can give our money a chance to really grow. Finally, waiting another month or for our next paycheck for a desired purchase can help, so think about delaying that gratification a bit to help meet future goals.
- Fumble #9 – Giving Up Too Easily/Not Understanding Compounding Interest
As mentioned above, building strong savings and financial stability takes time, effort and consistency. It also includes the magic of compounding interest! This is where depositors are rewarded with some percentage of interest (extra, free money) by placing their money in certain accounts for specified periods of time. Typically, the longer you keep your money in the bank and the more money added to the account, the more interest you earn. Also, because interest is then compounded (interest you’ve already earned earns interest too), it’s like magic in the way it can grow!
- Final Fumble # 10 – Not Having a Bank Account
If you don’t have a bank accounts/a savings account, you are missing out on compound interest (see above), the establishment of banking relationship for your future wants and needs (e.g., a mortgage loan), opportunities to learn about various ways to grow/invest your money as well as building credit. Doing your research into local and online banks is a good way to start to see all the benefits offered by banks and is safer option to store extra funds and a way to encourage you to save!
If you’re dealing with high interest debt payments as well, see what you can save with Parachute’s Debt Management Plan https://parachutecreditcounseling.org/dmp-calculator/
Would you like to meet one-on-one with one of our Financial Counselors to talk specifically about your budget? Check out our Financial Coaching Session https://parachutecreditcounseling.org/services/credit-budget-counseling/#financial-coaching or call 716-712-2060.
