They say that money cannot buy happiness, but that is not always true. Money buys opportunities, such as access to education, travel, and other experiences. Having enough money can also help you save a lot of stress because of the sense of financial security. However, there are so many people in the U.S struggling to maintain their finances. Here are some of the mistakes that they have been doing with their money.
1.) Superficial Spending
A 3 dollar’ cup of luxury coffee that you buy every morning on the way to the office will amount to 1095 USD in a year. That is a month’s rent for a studio apartment. Many people splurge on superficial spending because they can cost little, but what people failed to notice is that it can turn into a considerable chunk of change. To avoid hasty purchases, ask yourself these two questions: “Do I need this?” and “Will this benefit me long term?”. If the answer to both questions is yes, then make the purchase; if the answer is no, then you know what to do.
2.) Buying a new car
There can be a sense of satisfaction in buying a new car, but it can cost a considerable amount of money. Most people in the U.S buy a new car despite having one already. You see, cars do not increase their value. They depreciate quickly; hence, you will never get back the money that you have paid. The maintenance of these cars will also cost you a fortune. If you need to buy a car for transportation, I suggest purchasing a 2nd hand car. It would cost a fraction of the original price, and you can find ones that are good as new. However, if you live in a city where there is a reliable mass transportation system, then avoiding to buy a car is a better option.
3.) Depending on one paycheck
You may work from 8-5, and you still feel like your paycheck is not enough to sustain the lifestyle that you are living. This is mostly the problem when there is an unforeseen expense that has to be paid right away. The solution to this is to have savings by avoiding frivolous spending. By doing so, in case of unwanted events such as accidents and unemployment, you would have money to sustain you for a couple of months and enough time to search for a new job.
4.) Living in a Big house
A big house is equal to steeper taxes, sustenance, and utilities, which can be painful to your monthly paycheck. This is why if you are living alone and renting, opt for an apartment that has lesser space because it would cost cheaper. This way, you will have more portion of the money to be saved and used in acquiring your own home.
5.) Living on credit
Having credit cards are useful because they can be used to pay for things that you cannot afford as of the moment; however, they are only helpful if you use it for this purpose.
Unfortunately for some Americans, they use credit cards as if they have the money to pay for it when, in reality, what they are spending is money that they will still earn. To avoid making this mistake, only use credit cards for purchases that you need. You may think that you are saving by using credit without considering all the added tax that it comes with.
The lack of financial literacy of most Americans is crippling their day to day life and future as well. It is essential to learn about these mistakes so that you will save yourself from committing and struggling with finances in the future. When it comes to money, you have to think of long term security and stability.