Personal finance leaves so much for debate. Some lean heavily on investments for the future. Some clip coupons and squirrel away every extra penny into a single savings account. Some ignore the household budget completely, and just hope for the best.
Whatever your finance style, there’s probably room for improvement. Some budget snafus won’t lead to an outright disaster. But some mistakes can hurt you now, and even more as the years go by.
Here are the 6 Deadly Sins of personal finance, and how to repent:
Emergency Savings Shouldn’t be Optional
You should be saving every month, but toward what? Sarah Kaufman, for Motley Fool, lists no emergency fund as the #1 financial mistake. Emergency savings can be the difference between staying afloat or sinking under if a crisis hits.
Emergencies come in all shapes and sizes. It could be a job loss, a medical emergency where insurance doesn’t pay 100%, or even an unforeseen legal issue where representation costs thousands of dollars. Start an emergency savings fund now, if you haven’t already.
Minimum Monthly Payments Equal Treading Water
The minimum monthly payment is just that — the bare minimum. Minimums are not designed to help you make progress. They do, however, provide the company you owe with a tremendous amount of profit in the form of interest.
Whenever possible, pay more than the minimum required. This applies to your mortgage, credit cards, and any other debt that you’d rather leave behind. Check for prepay penalties, which some mortgages have. And don’t forget to earmark the extra you pay each month so it will apply toward the principal. Otherwise, it might just go toward interest or the next month’s minimum payment.