Stop spending
One major mistake that people make is that they stop spending, since this seems to be the obvious way to save money. If done without foresight, not spending money can mean additional expenses down the road. People should stop spending on non-essentials, but not stop spending on preventive maintenance and basic upkeep. You will save money today by skipping a check-up at the dentist, but if doing so leads to dental problems down the line that would have been caught early, the savings actually turns into a longer-term cost.
Buying cheap and not buying value
People often think the best way to save is to go with whatever is the lowest price. While this will work some of the time, the real key to saving money is learning to buy whatever is the best value. Buying the cheapest tools that will only last a year or two, rather than paying twice as much for tools that will last a lifetime, ends up costing you more in the long run since they have to be replaced time and again.
Assuming there is a quick fix
When people need to save money, they usually look for a quick fix to reduce their costs. They want to do something that will immediately solve the problem so they begin cutting out expenses one by one assuming that making each one will solve the problem. When it doesn't, they cut another hoping it will resolve the issue, which it also won't. They keep trying to make quick fixes not realising that there is usually no quick fix when it comes to saving money.
Denying yourself
Many feel that saving money requires denying the things that are enjoyed, which makes the entire process painful. In order to avoid this pain, they wait as long as possible to take the steps they need to lower their expenses and save money. The longer they wait, the worse the problem. This means that it will be harder to get their finances back in order.
Believing there is no need to make fundamental changes
Much like dieting, learning to save money is more than knowing what you need to do. Many people think that they can learn to save money without making a fundamental change in the way they do things currently and approach savings as a short-term problem. When done this way, a plan for reducing costs and saving money never becomes a long-term priority, which results in not being able to save money the way they had assumed they could.
Paying yourself last
If you wait until your bills are paid to figure out what you can afford to save, you've already lost the savings game. Successful savers make saving their top priority, something known as "paying yourself first." They set aside a certain amount from each paycheck, then cover bills and other spending with what's left.
Saving all in one pot
Mingling your emergency fund with your future down payment, your vacation fund and next month's insurance premiums is a recipe for confusion, if not disaster. You may not be able to figure out how much you have saved for each goal and it's too easy to dig too deep into the pot for one objective, leaving too little to cover the others. Instead, set up multiple sub-accounts at an online bank that doesn't charge extra to do so and label each one for its intended purpose.
Saving at the same bank where you have a checking account
While you want your savings to be reasonably accessible, you don't want instant access — which is what you typically get if your savings accounts are linked to your checking account at the same institution. Having your savings at a separate institution slows the transfer process, but the built-in delay can discourage you from raiding the money on a whim.
By Jennifer Agbeyeke
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