If you’re new or have even been a regular reader of Wallet Impact you may have heard about some of the small successes I’ve had from saving up a decent emergency fund to building a brand new house but I have to be completely honest with you my finances are far from perfect.
I still have some credit card debt, I still do not have a fully funded emergency fund, and more than that I’m still stuck in the paycheck to paycheck trap for the most part. In fact after reviewing my budget for the month of May I only came out $245 ahead.
Well that’s all is about to change.
In this article I’m going to talk about the biggest mistake I feel people make with their finances all the time. I now this from experience because I use to work in financial services and you might be surprise that it’s not what you might think.
Your Finances Are Always Changing
So what is this mistake that I am referring to?
I got comfortable.
Yup, that’s right I got too comfortable with my financial situation and slowly things began to slip and before I knew it my once great financial situation began to fall apart.
Now you might be thinking why did this happen, and the answer to that is when it comes to your finances they are either going up or they are going down. Your finances will never stay in the same spot no matter how much we would like to think they might.
Something will always come along to disrupt our financial situation, whether it’s it new tires for your car, an unexpected medical bill, or some other financial emergency.
In my case I thought since I had saved up a great emergency fund, and paid off my credit card debt, I didn’t need to pay attention to my budget or other financial obligations as much anymore.
How wrong I was.
The key is to be prepared and to put safeguards in place before these situations arise. That way you can take care of them quickly and get back to the things that improve your finances.
How To Avoid This Mistake
Going back to my story, I failed simply because I got too comfortable with my situation and stopped doing all the things that made me successful.
Things like contributing to my emergency fund and reviewing my budget on a weekly basis are key critical things that have helped me make big improvements in my finances and once I stopped doing these two things my finances began to suffer.
So here are two things you should do to avoid this mistake.
- Review Your Budget Weekly – Reviewing your budget on a weekly basis is the best way to spot problems in your spending and improve your situation. I know some people review their budgets monthly but I’ve found using a weekly approach allows you to spot problems before they get to bad. I also personally use Mint.com to manage my finances because it’s free and simple to use.
- Contribute To Your Emergency Fund Weekly – I also contribute to my emergency fund on a weekly basis as well. The reason I do this is because I get paid weekly and this is the best time for me to contribute to my emergency fund. Here’s a great tutorial to help you set your emergency fund up.
Not All Is Lost
I want to wrap this article up by saying that my entire financial situation is not completely ruined because of this mistake. I did manage to catch things before they got too bad.
In fact I still have around $3600 in my emergency fund and I only have around $3000 of credit card debt. Things could have gotten much worse, I could have let my debt stack up even more, and burned up all of my emergency fund cash but I didn’t.
Rather I took charge and now I’m changing my financial situation for the better.
What are you doing to take responsibility with your finances?