Many frugal people switched to their money-saving lifestyle after suffering some financial hardship. Certain mistakes have forced them to consider their approach to funds and adopt a more conscious outlook.
Honest frugalists will admit that they can never be perfect, and they still make mistakes with money.
The mistakes listed are among the most common financial traps around. Even frugal people have made them, but being aware of the facts should make us more wary.
1. Failing to Budget
It’s the first lesson in financial planning, but many of us still forget to put a budget in place. It’s simple to load a spreadsheet, but if you’re not tech-savvy, a pen and paper will do.
Without budget planning, there is a greater risk of overspending or not having money in your account to cover bills. It’s financial planning 101, so be sure to note down all your income and expenditure.
2. Falling for Special Offers
Shopping can be a dangerous mission for all of us. Stores list their latest deals, and it can be tricky not to fall for them when we’re getting our weekly groceries.
There are ways in which you can stay away from temptation, and you should never shop without a list of requirements. Another common error is to head to the store when you’re hungry, and we can lose our sense of judgment when in that state.
3. Not Having an Emergency Fund
Budgeting should always involve putting money aside for an emergency fund. Without it, the only option may be to obtain credit when the worst happens.
It’s not always due to a failing on the individual’s part. Finances may be tight and outgoings high, but it’s advisable to put whatever you can aside, to keep credit cards and loans at bay in the future.
4. Missing Payment Dates
Bills need to be paid on time or the provider will likely charge interest and maybe even a late payment fee. It can be easy to overlook our commitments at times, due mainly to today’s busy lifestyle.
Some frugal people are even guilty of missing the odd payment date. The way to tackle this issue is to keep a diary and set up regular payments through your bank.
5. Paying the Minimum
Credit cards and other forms of borrowing rely on interest to make money. Frugal consumers do use credit on occasion, but their aim is always to pay off the balance in full.
It might be harsh to call this a mistake because not all of us are in a position to pay off a balance every month. However, by only paying the minimum, it takes longer to clear the debt, and that interest mounts up.
6. Setting up Unnecessary Direct Debits
Direct debits and standing orders may be convenient, but are we paying too much for this type of service? This is a form of credit and not every arrangement is interest-free.
Home and auto insurers will typically make a charge for spreading payments over 12 months. Many of us fall into the trap of not checking the math, so always look to pay in full unless no interest is being applied.
7. Using the Wrong Card
If you have several cards in your wallet, you may become distracted and use the wrong one. Pulling out a credit card can lead to unnecessary interest. Other consumers have mistakenly paid with the wrong debit card and gone into their overdraft.
Leave the unwanted cards at home when heading out, and you can avoid another common money mistake.
8. Not Making the Most of Savings Accounts
A hectic life also leaves little time to address the smaller financial plans. If you have savings, be sure that you are making the most from interest rates. The percentages can change regularly, and it can be hard to keep up with the latest trends.
Try to put some hours aside each month to consider your savings accounts, or arrange a quick call with your bank or financial advisor for a check-up.
9. Not Using Windfalls to Pay Credit
When we come into some money unexpectedly, it can be tempting to save or spend. In fact, the best option is to pay off any existing credit where possible. Interest on loans will always be higher than the rates attached to savings.
Psychologically, we may feel that the funds have disappeared, and we have nothing to show for them. The reality is that paying expensive credit cards and high-interest loans is the best way to use windfalls.
10. Discarding Leftovers
We’re encouraged to use up leftover food and keep down waste, but it’s not always easy to do so. At the end of a family meal, the uneaten scraps look less-than-appetizing and only seem fit for the trash.
Even frugal people struggle to follow their own advice sometimes. Using up leftovers is labor-intensive, but it can save hundreds of dollars on our shopping bills every year.
11. Forgetting to Cancel Free Trials
Those free trial offers can be annoying. We often set them up with no intention of following through and paying full price for the product or service. Instantly, they go out of our minds, and we are landed with an unnecessary bill.
It’s a common financial mistake and another that can be avoided by using a diary. Set up an alert on your smartphone and cancel that trial in good time.
12. Overlooking Unwanted Subscriptions
Having entered into a subscription deal, it’s easier to leave it running, even when we don’t want the product or service in question. TV streaming packages are the biggest culprits in this section, and most consumers overlook these at some stage in their financial journey.
There are several apps that will help you trawl through your emails and identify all of your subscription packages. Identify the ones you no longer want and save a few dollars.
13. Not Using Loyalty Points
Store loyalty schemes usually come with expiry dates attached. Following a frugal lifestyle means making the most of every offer, and this is a method where every cent counts.
It’s another common mistake that can be avoided with an effective diary system. Keep a separate financial diary, or set up alerts that tell you when your loyalty points are about to expire.
14. Spending More When We Earn More
Some of us simply can’t help spending more money when we get a raise or any other increase in income. We always make our funds stretch to cover our outgoings, or we feel that we should be spending in line with our earnings.
This is a phenomenon known as “lifestyle creep.” It’s a common trap, and many are prone to it, even those who follow a frugal regime.
15. Not Using Free Services
When you read articles advising you on how to live frugally, they will always refer to free or cheap resources. For those who like to read, there are libraries, while freecycle websites can also provide products at no cost.
Using these outlets requires time that we may not have. It’s often easier to shop online, but paying for items when you can access them for free can still be considered a mistake.
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