Do you always make smart decisions when it comes to your finances? Be honest.
Most people don’t have a spotless record when it comes to money. Everyone makes mistakes here and there as they learn how to manage their finances as they grow up, earn a living, and build a life.
Unfortunately, some people get stuck in unhealthy spending cycles that can wind up costing them lots of money. These spending traps are important to identify so that you can avoid them and save your money.
While everyone might have their own traps to learn from, here are some common ones below.
1. Not Preparing for the Unexpected
A budget isn’t complete until you set aside some money for the unexpected. After all, life is full of surprises. One day your car needs new brake pads and motors, or your cat needs surgery to remove a hair tie from its stomach, or your roof springs a leak.
While you can’t predict if these exact emergencies will ever happen, something like them will eventually turn up. You can prepare for them by saving money in an emergency fund.
Without savings, most people would have to lean on an online personal loan for help. You can do the same if you run into these issues before you manage to save up enough. If approved, you can get access to what you need to cover unexpected auto work or vet expenses.
While there are online personal loans to help you in an emergency, they will create another bill you have to pay, so you should use them sparingly in urgent, unavoidable situations.
2. Stealing Money from Your Emergency Fund
Once you start building your emergency fund, you shouldn’t touch these savings until something goes wrong. Unfortunately, once your fund becomes a stockpile of cash, it’s hard to ignore the temptation to siphon some of this money to play around.
You might not see the harm in withdrawing $100 to afford tickets to your favorite artist who’s coming to town. However, that leaves you with $100 less the next time your car acts up or your cat needs vet care. You may have to borrow a personal loan to cover this deficit, even if you save every month unfailingly.
3. Signing up for Retail Credit Cards
Another spending trap is the retail credit card. You usually only hear about this when you’re about to check out, whether in-person or online. The site or cashier will offer a significant discount on your purchase if you sign up for the company credit card. From then on, you might get a smaller discount with every other purchase.
If money is tight, this offer can be tempting, but you have to think about it from another angle. A store credit card doesn’t always give a worthwhile discount after the initial reward. It also opens up a new avenue of spending. If you have a hard time ignoring splurge shopping, this new card can encourage you to spend more and wrack up debts.
4. Buying Something Because it’s On Sale
You walk through a store looking for new shoes when you spot a sign declaring all sneakers are BOGO (Buy One, Get One 50% off). Paying 50% of the sticker price is an exceptional deal — there’s no doubt about that. But if you only need one pair of sneakers, even buying one half-off is spending more money than you should.
A deal is only a deal when you have to buy the item in question, regardless of its price. Otherwise, you’re spending money you didn’t anticipate on something you don’t need.
Nip these four bad habits in the bud and you’ll save more money.