Poor credit, no savings for emergencies, no retirement, and falling into major money pitfalls often leads to years of financial trouble. A survey of the top financial planners came up with the six biggest money mistakes people make and how to avoid them.
1. NOT HAVING A BUDGET
“Most people don’t know where their money goes,” says Marlena Sonn, a Certified Financial Planner at Christopher Street Financial.
How to Avoid It: Keep a spending diary to track your monthly expenses. Use only your ATM card for purchases, and keep a log at the end of each month.
How to Recover: Create a workable budget that will actually work over the long term. Experts suggest breaking up your take-home pay as follows: 65% toward things you need, including groceries, rent or mortgage, utilities and transportation; 20% toward savings and debt reduction and 15% toward things you want.
2. Loaning money to family and friends instead of saving or paying down debt.
According to an African American Financial Experience study, Black families are often financially responsible for other family members. 57% Fifty of those surveyed said they provide financial support to another family member or to unemployed friends.
How to Avoid It: Take a “no personal loan” policy or consider ways to help other than money.
How to Recover: If you’ve already loaned money, consider asking the person to complete a promissory note.