When it comes to staying out of the red and keeping control of your finances, there are several common errors people make time and again. These are indicators of a bumpy financial road ahead and should be avoided at all costs so they don't ultimately end up costing you.
CBS MoneyWatch recently identified several typical financial missteps that can quickly land consumers and entrepreneurs alike in hot water if they're not quickly rectified.
The first involves failing to save for unexpected events. These can vary in size and severity, and may include everything from a health emergency to a broken-down car. Whatever the cause, the effect is the same – your bank account takes an unexpected hit, and you don't have the funds to absorb the cost.
According to MoneyWatch, you should have three to six months' worth of living expenses saved up for unforeseen eventualities. Understandably, even those who prided themselves on keeping a robust rainy day fund may have struggled to maintain this benchmark thanks to the recession. However, even if three to six months is unrealistic, every little bit helps, and just a few hundred dollars can make a difference when push comes to shove.
Failing to put together a comprehensive financial plan is often associated with deprivation – like a financial version of a diet. However, the real reason behind compiling a budget is to track what you're spending and draw attention to areas of excessive expenditure that you may not realize even exist.
Setting up a budget requires some work, but the payoff will be huge provided you keep to it.
"You'll need to go through a year's worth of bank statements and credit card bills and figure out what you're spending on everything from utilities to shoes," the source advises. If the number you come up with is wildly disparate with your actual spending, it's time to take a step back and consider what you didn't include and exactly how much of an effect that's having on your funds.
Paying off credit cards on time may seem like an obvious component of maintaining financial health. However, failure to do so can still be a stumbling block for many people who spend beyond their means and are unable to cover their expenditures when the time comes. The media outlet suggests thinking about credit card interest rates whenever temptation strikes to buy something out of your price range.
That's not to say you can't use borrowing to your advantage. Consolidate your bills, gain a financial safety net or even plan for a vacation with personal loans for yourself or commercial loans for your small business. My Bank offers competitive rates and fast decisions made locally.
Lastly, if you do get in over your head, don't forget that My Bank's financial services advisers are here to help, whether it's your personal finances or your business that's faltering (often, of course, they're connected). As MoneyWatch notes, while it can be tempting to bury your head in the sand, ignoring a financial problem won't make it go away. In fact, not dealing with it is likely to only make it worse.
That said, of course, it's preferable not to get into a bad situation in the first place. Working with your local community bank from the beginning can help you avoid such a quandary entirely.