The top 5 mistakes to avoid when it comes to your money
Money struggles are something we can all identify with at one point or another—particularly when you’re just starting out in your career.
In fact, to paraphrase a song from a certain 1970s Swedish super group, that whole notion of having to ‘work all night and work all day to pay the bills you have to pay’ is a reality that 53% of Canadians are dealing with.
If you’re lower on the pay grid, living paycheque to paycheque is a reality many education members have to deal with. Because once you’ve factored in pension contributions and all of your other regular deductions, it can feel like you’re left with even less for yourself at the end of the day. Rising borrowing rates and costs of day-to-day items don’t exactly help matters much either.
That’s why it’s important to make every dollar count at every stage of your career.
The best way to do that is by avoiding 5 common mistakes when it comes to your money:
#1: Using your credit card(s) to make purchases—and then carrying a balance.
So, you like paying for your purchases on ‘plastic’ in order to rack up points (or miles) to put towards your dream getaway during March/summer break?
We totally understand and that’s fine. Great even.
However, if, in addition to those rewards you’re also racking up interest charges (by not paying off the balance in full), you should consider putting those credit cards on ice. Because over time, all that interest can add up to tens, hundreds, even thousands of dollars.
Did you know: Credit card companies are mandated to reflect on each statement how long it would take to pay off your balance if you were only to make the minimum monthly payments. This is to help cardholders understand the potential timeframe and interest costs associated with only making minimum payments.
#2: Making only the minimum payment on your credit cards.
If you’ve racked up credit card balances that are too exorbitant to pay off in one fell swoop, then don’t get caught in the minimum monthly payment trap. Because when you’re only making the minimum payment, you’re also paying the maximum amount in interest—which keeps you in debt longer. If you want to save more money in the long run, be sure to make extra payments as often as you can afford it.
Think your monthly budget is too tight to make extra debt payments? Here’s how to find the money.
#3: Not comparing rates/products with other financial institutions.
If you do have to maintain a balance on your credit cards, it’s definitely worth conducting a bit of comparison shopping with other financial institutions—especially in today’s high-rate environment. With nearly 1 in 4 Canadians having reached a financial breaking point of being completely out of money, getting control of your debt should be a top priority. If you’re carrying multiple balances on various loans and credit cards, you may want to consider consolidating that debt into a line of credit, which can help make monthly payments easier to manage. When it comes to assets such as your mortgage and investments, it also pays to compare—because you just may find that the grass really is greener elsewhere.
#4: Choosing ‘instant gratification’ over ‘deferred gratitude’ when it comes to purchases.
An inability to shift your mindset when it comes to spending choices can also be part of the money trap you currently find yourself in. For example, everybody loves going out for dinner, getting the latest smartphone, and making online binge purchases every now and then. However, when you finally start to consider the actual value of the item you want to spend money on—and how the value of that item works for or against your overall budget, you then start to measure its worth a whole lot differently. So instead of going out to dinner, which may cost $50 or $60—you could simply cook at home and put that money towards an extra debt payment, or even towards emergency savings.
Measuring worth and placing emphasis on value not only helps you to make wiser spending choices; it shifts your focus from instant gratification to deferred gratitude.
#5: Thinking a ‘quick fix’ is the answer to all your financial woes.
Rome wasn’t built in a day. So keep that in mind if you get discouraged that your finances don’t get sorted out overnight (unless of course you’re lucky enough to win the lotto). If you’re looking to make any kind of long-term difference where your money is concerned, you need to go about it in a very organized way (i.e., building a financial plan). Also understand that the reason anyone ever gets into financial difficulty in the first place isn’t because of making one bad purchase—but a series of consistently poor spending choices over a period of time. It’s a pattern you have to learn to identify (and most importantly, correct) when it comes to your own spending habits.
Because every financial situation is different, getting the right advice is key to avoid making major money mistakes. That’s where Educators Financial Group can help.
Since 1975, we’ve been providing financial guidance and solutions exclusively to members of the education community. This means we understand the challenges of balancing your finances depending on where you are in your career, or where you happen to be on the pay grid—as well as what kind of pension income you can expect to bring in during retirement. If you’re looking to avoid making mistakes with your money in order to get your finances back on track, be sure to call on us for an educator-specific perspective.