It's easy to make little missteps with your money. But those missteps add up – costing you in the long run.
Some mistakes can feel safe, but they're really just psychological crutches that cost real money. So instead of following your heart, follow the math when it comes to your money and avoid:
1. Keeping Too Much Cash
Yes, your childhood piggy bank was a dumb idea (mathematically speaking) – even if it did teach you a valuable lesson of frugality. Of course, keeping an emergency fund of 3-6 months expenses is important, but anything over that is costing you money.
Invest early, and start with whatever excess you would have normally put under the proverbial mattress.
2. Letting Student Loans OWN YOU
Debt is generally a bad thing, and instinct (and emotion) tell us to pay down debts ASAP. There is peace in knowing that you're debt free. But at what cost?
Are you sacrificing your retirement, paying higher taxes, or missing out on free money from your employer by not contributing to a 401k?
Take a good, hard look at what you're sacrificing by rushing to get debt-free. Are your student loan interest rates reasonable? Then you have more to gain by investing in a long-term account. Remember, the sooner you get that nest-egg growing, the better.
3. Accepting BAD Interest Rates
This one might seem obvious, but I was a victim of my own financial ignorance as a teenager. Student loan rates can be ridiculous. Some of mine were upwards of 13.5% – and I PAID those rates. I lost thousands of dollars early on by being blind to these atrocious rates.
Don't make this mistake. If you have private loans that are not eligible for income contingent repayments, LOWER YOUR STUDENT LOAN INTEREST RATES.
4. Not Having a Budget
Inputs and outputs – that's all it is. If you're one of the many Americans that lives paycheck to paycheck (regardless of income) – then start measuring where your money goes. You might be surprised where you're bleeding $100 every month.
Even a rough budget helps – and free tools like Personal Capital can nearly automate the entire process for you. In addition to showing you where to make cuts, it can be a good wakeup call to show you where your current income is falling short (and maybe get you thinking about a different job or side hustle).
Breaking down the realities of your current position as a spender and earner might not be fun, but it'll get you on the right path.