Saving money is a lot like cooking a great meal.
First, you need a good foundation, like a nice cooking pan that will support your investment – That is your bank or building society savings account. Next, you need just the right amount of heat – That’s the competitive rate of interest. Finally, you need to put in enough ingredients to make the whole process worth your whole – That is, of course, your actual savings.
However, if you’re cooking with a burn pan or poor ingredients, then this is a recipe for disaster. There are thousands of ways to screw up your cooking, and just as many ways to screw up your savings. While Peachy is unable to save your dinner, here are 21 mistakes you might be making and how to avoid them:
1. Getting the Wrong Savings Account
Remember the heat we mentioned above?
If you aren’t getting enough interest on your savings, your money is not working for you. It’s worth taking the time to check out several different banks and seeing which offers the best rates. It might help if you create separate savings accounts for savings, retirement fund, emergency stash and travel/holiday money.
2. Not Setting Rules
The most important thing about a savings plan is to have strict rules in mind, and to stick to them. If you don’t have definite aims about how much and how quickly you want to save, you are leaving yourself open to complacency. Know what you want to do, and do it.
3. Not Keeping Records
Keep a record of all of your income and expenses (you can use the free template here). This way, you’ll know if you’re meeting your goals and if you can afford to move extra funds to your savings pot. Without keeping a record, it’s all just guesswork.
4. Using Credit
Credit cards are a big no-no. If you are really serious about saving, then buying anything on credit is just throwing money down the drain. Cut up your credit cards and only use cash. With cash, you value the money more.
5. Not Factoring in Emergencies
Remember that emergency fund we talked about earlier?
Well, chances are you’re probably going to need it. Keep it separate from your main savings account so that the latter won’t be affected when disaster inevitably strikes and you have to pay for something unexpected.
6. Expecting a Raise
If you are factoring a raise into your savings plan but aren’t sure how you’re going to get it, then you’re only fooling yourself. Unless you have been explicitly told your pay is going up, expect to earn the same. Planning for something that isn’t there yet can land you in a big mess.
7. Being too Hard on Yourself
If you set yourself too high a goal, you will more than likely miss it. Your self-confidence will be affected and your willpower to continue with the savings plan will probably deteriorate. Set achievable targets.
8. Being too Easy on Yourself
And likewise, you don’t want to let yourself off the hook too easily. Didn’t make your savings target for last month? Try twice as hard this month. If you believe you can do it, you can.
9. Saving While in Debt
If you are already in debt, forget about saving until you are out of it. You are literally throwing money away if you try to save and juggle debts at the same time, since interest rates on loans are invariably higher than those on your savings account.
10. Skimping on Quality
Tempted to buy those poor quality shoes because they’re super cheap? You’ll more than likely lose money in the long run by having to replace them all the sooner. Don’t go overboard, but make sure you aren’t saving money just to have to spend it again next week. Beware of false economies.
11. Using Promotions
Forget buy-one-get-one-free (BOGOFs), Groupon offers and suchlike. These promotions are designed to make you spend money on things you normally wouldn’t buy. So, whilst you think you are saving, you are actually doing the opposite. On essentials, by all means, take advantage. However, these offers rarely apply to the essentials.
12. Being a Slave to Advertising
Magazines, billboards, televisions, cinema screens, radios – everywhere is screaming at you to buy, buy, buy. Reduce your exposure to advertising, and if you can’t avoid it, stay strong.
13. Buying Replacements
Forgot your sunglasses? Don’t buy another pair just because your perfectly good ones are sitting at home – squint through the pain for a couple of hours and try harder to remember them next time. Try to never buy something again just because you forgot the one at home.
14. Incurring Fines
These can be parking tickets, speeding fines, even overdue fines at the library. It all adds up! Cut them out of your life and stop throwing your money away.
15. Eating Out
This includes all meals. It can be very tempting to grab a sandwich for lunch, but with only a little preparation at home beforehand, you can make yourself something much more appetizing and much more cost-effective (and it will probably taste better too!).
16. Letting Food Rot
On the other hand, don’t cram your fridge so full that you have to end up throwing away half the food because you never got around to eating it. Keep an eye on the contents of your fridge and try to use up leftovers on their last legs in soups, stews and curries.
17. Not Taking Care of Your Assets
This can be your car, your laptop, even your headphones. Taking the time and effort to care for your belongings will save you shed-loads of cash on unnecessary repairs and replacements.
18. Buying the Cheapest even if it Incurs More Expense
It’s no use driving all the way across town to save a few pennies on the price of petrol when you will be using two times the amount of petrol to get there. Think it through and analyze a potential saving before acting.
19. Not Maximizing Your Income
Do you have the best paid job you can get? If not, keep looking. Maybe even take up further study to increase your employability. Or, get a second job. Or a third one! Earning money in your free time also reduces your chances of spending any.
Saving money on an accountant might seem smart, but could cause headaches and even wallet-aches if you don’t calculate them correctly. An accountant is trained to make sure you get the most rebates and pay the least taxes and could be worth the extra initial outlay.
If you’re not achieving your goals, don’t panic. Breathe. Reassess your situation, adjust your savings plan accordingly, and keep your chin up. You can do it.
Good luck with your savings. If you find yourself nodding in agreement to any of the above, make the necessary changes immediately so you can continue to save smarter.
Do you have any tips on ways on how to screw up your savings account? Let us know below.