Five Money Mistakes to Avoid in 2021
1. Not Utilizing a Budget
Many people avoid creating a budget because they feel it is time consuming and, frankly, boring. However, budgeting is a very useful (and simple!) tool that can help plan for financial goals and ensure that you spend within your means. There are several online budgeting templates, as well as apps such as Mint that can help in creating a budget. Make budgeting fun by ordering a pizza or take out and make a monthly night out of it!
2. Paying Premium Amounts for Groceries
Early in the pandemic, many people began having groceries delivered to avoid possible exposure at the grocery store. Households ordered food from specialty stores for convenience and for same-day delivery options. However, pricing from specialty grocers can sneak up on consumers. Some reported grocery bill increases by as much as 50%. Ordering groceries in advance from regular supermarkets may save premium fees, as well as the $5-$10 delivery charge. Picking up groceries yourself also limits exposure and prevents making any impulse buys you might make in person.
3. Overpaying for Essentials
Starting in March 2020, everyday items like toilet paper and paper towels became scarce. The uncertainty of the pandemic caused people to panic and buy necessary items in bulk. With better certainty that the paper supply will NOT be depleted, it might be smart to buy these items only as needed. Plan purchases strategically (when there is a sale or you have a coupon) rather than in panic.
4. Putting Too Much Cash in an Emergency Fund
Financial experts agree that a healthy emergency fund contains three to six months’ worth of living expenses, in case of inability to work for an extended period of time. However, many people began saving at unprecedented rates as a result of the pandemic. Often people placed more than enough cash in their emergency fund and missed out on good investment opportunities. If you have a healthy emergency fund, consider talking to a financial advisor about where best to put extra cash in order to earn additional money on your funds.
5. Using Debt That Costs More Than It Should
While consciously trying to avoid debt, sometimes it happens, especially with the difficult circumstances of the past year. While it’s tempting to use credit cards to cover unexpected expenses, interest charges can be a huge financial burden. Instead, look for lower-cost ways to fund the debt, like a personal loan. Personal loans typically charge less interest than credit cards. They may also be better for your credit score because it won’t affect your credit utilization ratio. Talk to a financial advisor and evaluate other options before turning to a credit card.