Having a good savings plan is far more involved than simply putting money into an account every week or month. Although this is how many people establish savings, this isn't really the best practice. If this is what you're doing, don't be hard on yourself. The reality is that many people make this mistake and others. Make sure you know what issues to avoid.
Treating Credit Cards Like the Plague
Credit cards aren't inherently bad. Some people use credit cards badly by spending more on their cards than they can afford. When used properly, credit cards can actually offer a way to save. This is especially the case when it comes to cash-reward cards.
These cards work by allowing you to earn back a certain percentage based on the transactions you perform. Instead of using primarily your cash, you could use the credit card and then pay off the balance each month. If you use your cards regularly, the amount of savings you build up can be significant.If you use your cards regularly, the amount of savings you build up can be significant.
Saving Too Much Money
From childhood, saving money is ingrained in the mind. Some people go overboard and actually save too much. Although it might seem like somewhat of an oxymoron, saving too much might actually put you further away from your goal.
For example, consider a 60-year-old saving for retirement. Getting as many bills as possible, including the mortgage, paid off within the next five years is important for this person. However, if he or she saves money instead of paying off debts, this leaves less cash to pay off expenses with in the long run. Although a person might have more money in the bank when they retire using this method, they will also have more debt, and in these cases savings are not quite as helpful as they could be.
Solely Using a Restrictive Savings Account
Restrictive savings accounts can be problematic for many. The primary problem is that restrictive accounts don't allow you to access your money without penalty, and there are some accounts that the users can't access at all. Your finances are always changing. Sometimes things are good, but sometimes the unexpected occurs, and you may need to tap in to your money.
You shouldn't be penalized for this. If you're charged a fee, then you will have less money to save. If you can't access your money, you could run the risk of falling behind on your bills and having your credit suffer, and this could hurt your ability to save in the future.
Avoiding these mistakes begins with a solid plan and the assistance of a financial consultant. A consultant can help set you on the best course to meeting your goals.