Top 5 Common Mistakes in Spending Your Disposable Income
If you have a good income, then you might think you don’t need to worry about money too much. However, having money coming in is only part of the route to financial security. How you spend that money is also very important. Especially given that none of us can be sure of our futures in the current climate, it pays to be sensible with money. Here are five common mistakes people make with their disposable income, and how to rectify them.
1) Using Credit Cards too Much
Credit cards can be intoxicating. They often seem like ‘free money’, and it is nice to be able to buy things without having to pay for them initially. However, they can end up a huge drain on your disposable income if not used wisely. You can easily end up losing a significant percentage of your monthly income in interest payments. Avoid this by using your cards sparingly, to amounts you know you can pay back quickly. If you already have a big balance, prioritise paying it off.
2) Not Planning Ahead
It’s easy sometimes to find yourself living from month-to-month, without thinking too much of the future. However, when expensive periods come up, such as a holiday or the Christmas period, you can find yourself struggling. Try and build up a pot of savings to help you cover those months that are more expensive than the norm.
3) Spending too Much Socially
Everyone loves to go out and have fun, but it is best not to spend excessively on nights out. Prioritise spending on the big and important nights, such as close friends’ birthdays. At other times, reduce costs by socialising at home. You’ll have just as much fun and save potentially large amounts of money in the process.
4) Allowing Yourself to ‘Leak’ Money
Many people get into the habit of regularly spending on things they don’t really need, and which add little to their lives. For example, that ?2.50 coffee on the way to work, which could easily be replaced by a thermos flask. It’s easy to change these habits, but first you need to identify them. Try keeping a spending diary for a week or two, and see where the money goes. You might be surprised how much you spend on things you don’t need and would not miss if you didn’t buy them.
5) Impulse Buying
While it’s easy to get into the habit of leaking money, it’s also easy to get into the habit of spending big on one-offs. If you find yourself doing this, sit down and think: do I really need this new pair of jeans? Will I actually watch this DVD box set? Remember that shops work hard to market things to you – that doesn’t mean you need to buy them if you won’t use them. If you’re prone to impulse buying, try adding up everything you think you’ve spent on impulse buys in the last six months – and then work out if the amount you’ve spent is commensurate with their value to you.
This article was written by a leading outsource payroll provider.
