With so many online resources available including savings applications, tax calculators, and stock guides, it is easy for people to believe that they can easily manage their savings. The truth of the matter is that people who choose to manage their savings are often making big mistakes that are costing them money, or could leave them in a bad position if they find themselves in a pinch for cash.
Below are the top five mistakes people make when they manage their own money.
- Failing to Utilize Accounts
One of the biggest mistakes people who manage their savings make is keeping too much money in their checking account. Typically, checking accounts earn no or zero interest. When you leave your savings money in a checking account, it is going to waste.
If you have extra money that you consider saving, it should always be put into a vehicle that will earn you interest. Even if you move it to a temporary savings account while you decide where to invest it. You should aim to keep about 1 month’s income in your account to cover day to day expenses.
- Not Saving for Retirement
Another major mistake people management their savings is not contributing to their company 401K or pension scheme. Doing this is one of the best ways to secure your future when you retire. Employers will take automatic deductions before giving out your pay check. Over time, you’ll grow accustomed to receiving a lower amount knowing that the rest is going to a safe place. In addition, many employers offer matching programs to grow your retirement savings even faster.
- Being Poorly Educated
With so many online trading platforms available online, people managing their own saving often make the mistake of trading on their own without enough education on the topic. If you want to trade online, you should do so on a platform that provides you with enough resources needed to make sound financial decisions. There are also many different online brokers out there, so you want to do your research and compare brokers on a site like onlinebroker-reviews.com.
- An Emergency Fund is Essential
When people manage their own savings, another major mistake they make is not having enough set aside for an emergency. Traditionally, people were advised to set aside 3-6 months of living expenses in case they find themselves unemployed. However, in this day and age where people find themselves unemployed, it is taking them much longer to find a new job.
Most experts now recommend that you put aside 8-12 months of living expenses. Consider putting this money away in a ROTH IRA. If you need it, you can withdraw it with no penalty or tax hit and if you never need to tap into it you have been adding to your retirement fund.
- Missing Extra Fees
People who manage their own savings also often make mistakes when choosing the accounts to place their savings in. People do not pay attention to the fees that some of these institutions charge and end up shelling out large sums of money on hidden fees throughout the year. One should ask for all the fees up front and compare offers before making a commitment.
Manage your money more efficiently by taking the above advice into consideration.