Knowledge for the New Year: Common Financial Mistakes You Can Avoid in 2022
2022 is officially here! The new year brings a fresh start and a chance to do things differently, and your finances are no exception. If you’ve slipped up in years past, shake it off! Common mistakes don’t need to be repeated in 2022. Start this year on the right path, towards bettering your financial wellbeing. To help you out, here are some common financial mistakes, and how you can avoid them:
Not Having or Maintaining a Proper Emergency Fund
Emergency funds are very important, but many of us tend to forget or neglect to build a proper fund. Although any savings are better than none, ideally, you should have 3-6 months of income accumulated over time in case of extenuating circumstances. And, after building up a proper fund, don’t set it aside for years and years without checking in. It’s important to touch base as your lifestyle and income change. What seemed like plenty 10 years ago may not be of much help today.
Forgetting About Automatic Payments
From streaming services to shopping memberships, you could be signed up for more than you realize and, in turn, paying for more than you need. Take a look at your automatic payments this month and see if there are any subscriptions that you don’t need or don’t use. There may even be some hidden fees you weren’t aware of. Utilizing mobile banking is a great and easy way to check your balances and view transaction history. If you haven’t already, download our mobile app to keep up with your recent transactions.
Postponing Your Will and Estate Planning
Surprisingly, 2 out of 3 adults in the United States still didn’t have a will in 2021. Preparing a will is not a comfortable task, but it is very important for you, your family, and your finances. It’s also important to update after any big life events such as having a child or buying a house. Having written documentation in place ensures that your wishes will be seen through and makes it easier for everyone long term. If you don’t have a will or haven’t updated yours in a while, consider making it a priority this year.
Not Monitoring Your Credit
Forgetting to pay a bill or overlooking your credit report can cause you to pay high interest rates and seriously affect your credit score. Keep up to date, check your credit report regularly, and don’t miss deadlines. Don’t let small mistakes sustain big costs.
Leaving No Room in Your Budget
Budgets act as great guidelines, but sometimes they can become too strict to be remain effective. It is important to keep flexibility in your budget in case of unpredictable situations or unexpected expenses. Also, leave wiggle room in your budget for fun or other personal activities. Budgets are easier to follow when they are realistic and account for these possibilities. This way, if something comes up, that expense is already accounted for. And, if you don’t end up needing all of the money you budgeted, you can put it towards your savings or emergency fund.
Not Comparison Shopping for Big Purchases
As tempting as impulse buying is, remember big purchases are a big deal. Make sure you take your time and consider all your options before deciding. When it comes to loans, housing, or other big financial commitments, don’t settle because of convenience. Switching insurance, loans, etc. could save you big time in the long run.
Overlooking Financial Planning
Financial planning involves many different components, including setting a realistic budget, saving for retirement, paying off debt, and maximizing your investments, to name a few. Most of these come down to priorities. Taking the time to plan will help you save money, make money, and follow through with your individual goals. If you would like planning assistance, be sure to reach out to a financial planner or advisor.
Some of these mistakes may feel all too familiar, while others may have never crossed your mind. Regardless, mistakes happen to the best of us. All we can do is try our best to avoid these mistakes in the future, starting with 2022. Remember, Valley Credit Union is here to help you succeed in any way we can. Here’s to a happy and prosperous new year!