We’ve all made financial mistakes and, odds are, we’ll make a few more. But financial mistakes can be costly over time if we don’t learn from them. Here are some of the most common money mistakes in Alberta:
1. Spending too much, month to month
Overspending can be controlled by creating and committing to a budget and tracking your expenses each month.
There are plenty of online tools that can help, or you can opt for the old fashioned way: save your receipts, use a calculator and keep a spreadsheet.
2. Not having a financial plan or budget.
It’s difficult to reach any destination without having directions or a good map.
Just like GPS can give you detailed directions and guide you to your journey’s end, a smart financial plan and clear budget can help you reach your financial goals. Not sure where to start? Connect with an ATB Financial Advisor in your neighbourhood.
3. Borrowing to buy luxuries that lose value over time.
Sometimes we must take out a loan to pay for things like a new car, home or tuition, but there are some luxury items that might not be worth the cost and interest over the years. Before you take out a loan to make a lavish purchase, like a luxury car for example, think about how long it will take to pay off and if it will retain its value, both financially and sentimentally, for that period of time.
4. Overspending on important occasions such as weddings, graduations, Christmas, etc.
Celebrating special occasions is important, but purchasing expensive gifts that might deplete your savings or put you in financial stress is not a good idea. Make sure you budget for gift-giving and celebrations, and remember that homemade gifts and quality family time can be just as meaningful as extravagant gifts.
5. Habitually borrowing from your retirement account.
It’s important to enjoy life in the moment but dipping into your long-term retirement savings account can leave you stranded when you need the money the most. Talk to a financial advisor about saving for both short-term and long-term goals. They can help you create a budget that allows for vacations, vehicles or emergency purchases throughout life, without having to borrow from your retirement savings plan.
6. Co-signing on a loan for your child before they’re financially ready and responsible.
If your child is not financially ready to make a major purchase, co-signing on a loan could be a costly mistake. Not only will they miss the lesson on responsible saving and spending, any missed payments could reflect poorly on your personal credit rating. It might be hard saying no to something they really want, but a little tough love can teach them a valuable life lesson.
7. Viewing loan extensions or skip-a-payment plans as “free money.”
When it comes to loans, there is no such thing as free money. Just because you’re not paying back your loan now, doesn’t mean you don’t still owe that money. If you spend it, you might find yourself in trouble when the payments are due. Do you future self a favour and use that money to pay off the debt.
8. Making use of “buy now, pay later” plans without understanding the financial implications.
“Don’t pay for six months!” Sounds great, right? It might be a huge mistake. Don’t jump into those “buy now, pay later” offers without understanding that you could pay higher interest if you miss a payment in the future. It’s a better idea to purchase things when you have the money and can afford it.
9. Taking out a new credit card to pay off an existing card.
Going into more debt doesn’t solve your current debt. If you need help paying off debt, consult with a financial specialist. They can help you create a budget and financial plan that will solve your debt problems.
10. Looking at long-term investments with a short-term view during economic downturns.
When the economy takes a dip, it’s easy to worry about your long-term investments. Economic downturns do not last forever, so don’t panic! Stay the long course, trust your financial advisor and keep your sights on the future.
11. Taking financial advice from well-meaning people that don’t have financial expertise.
There are people in your life that you trust, but that doesn’t mean they are the best people to turn to for financial advice. Maybe your friend is onto something with that hot stock tip or real estate deal, but it doesn’t hurt to double check with a financial advisor first.
12. Duplicating insurance coverage or buying insurance that’s not necessary for your circumstances.
Whether it’s auto, home or business insurance, it is designed to protect you against financial losses from unforeseen damages. Having multiple policies to cover the same risk is unnecessary, redundant and will not result in a better payout. Buy what you need and only what you need.
13. Telling yourself that you’ll organize your finances tomorrow.
The best time to start saving for your future is today! If you need some help creating a financial plan, dealing with debt or making a budget, contact a financial advisor or visit your local branch.