Many people make a decision to change their money habits–whether that means saving more, spending less, or paying off credit cards–because for many Americans, money is a constant source of stress. To help you get control of your finances (and reduce your stress level) here are some completely avoidable mistakes you may be making:
Not giving back to God
Giving is a way to honor God and thank him for everything he has given to us. Most people think once they get their finances in order, then they’ll be able to give. Our experience is that once you start giving back to God some of what he’s given to you, everything else in your financial life falls into the proper place and you are able to make progress on your goals. Acts 20:35 “Keep in mind the words of the Lord Jesus, who himself said ‘It is more blessed to give then to receive.'” Giving should be your first financial priority.
Spending more than you earn
One of the stupidest mistakes of all is simply bad math. If you spend more than you earn, it always catches up with you. This is not to say you have to pay for everything with cash–mortgages are a necessity for most people. But unless you know you are living within your means and sticking to a realistic budget, you may be digging a hole you’ll never be able to fill.
Not saving anything:
Financial planners all have their own opinion about how much you need to save for a rainy day fund or to provide for a comfortable retirement. But not saving anything, and living paycheck to paycheck, is a sure recipe for disaster. It means you’ll always be in debt and will never have enough saved for those mini emergencies that are sure to come along. Proverbs 21:20 “Precious treasure and oil are in the house of the wise, but the fool consumes them.”
Living in a place you can’t afford:
It’s too easy to buy more house than you really need. Most financial experts say you should spend no more than one-third of your take-home pay on housing and related expenses. This is especially true for those who don’t make much money, because other bills will quickly gobble up the rest of your budget. If you stretch yourself too thin on housing costs, you may never be able to get ahead financially.
Missing out on a 401k match
A 401k match is literally free money from your employer as a reward for something you should be doing anyway, so take advantage of it. Not contributing to a retirement plan with an employer match is like getting a gift of cash and throwing it away.
Investing with greed or desperation
There are risks with any investments, and the risks are especially high if you are greedy. High rates of return usually mean high risk investments. And if someone promises you instant profits or rates of return that seem to be too good to be true, run like the wind!
If you build up a good emergency fund and start planning for retirement early, you don’t have to take big risks out of desperation. 1 Timothy 6:9 “Those who want to get rich fall into temptation and are caught in the trap of many foolish and harmful desires which pill them down to ruin and destruction.”
Withdrawing retirement funds early
If you are saving for retirement, it’s tempting to think the money in your 401k or IRA can be used for anything that comes along. Cashing out one of these retirement funds early can often come with steep penalties, eating into your hard-earned savings.
In addition to the tangible loss of the money you withdrew, you also lost out on the interest you would have gained if the money had stayed in your retirement savings. Plus, you are wasting more money by having to pay a penalty for early withdrawal. Shifting the shortfall from one part of your budget to another is not a viable long-term solution. Proverbs 21:5 “The plans of the diligent are sure of profit, but all rash haste leads certainly to poverty.”
Waiting too long to buy life or disability insurance
Life insurance companies have set premiums based on the risk of payouts. Thus, an older American has to pay a higher premium for life insurance, so why wait? Most people can take out a substantial and very affordable term life insurance policy in their 30s which will take care of their spouse and family into their 50s or 60s. The same holds true for disability insurance to protect your earnings on the job. Genesis 41:30 “Joseph saved in years of plenty for the time of famine.”
Failing to make a will
Along the same lines, a good will is a crucial part of providing for your family should tragedy strike. In most cases, a visit with a qualified professional for a few hours will ensure your family stays in control of any assets and avoids harsh estate taxes, not to mention preventing any squabbling among survivors. Psalm 90:12 “Teach us how short our life is to that we may become wise”
Following the trends and keeping up with the neighbors
Don’t let what other people are doing lead you astray. There are very few people who follow Biblical Financial principles, but we know they work. The bottom line is that as long as you are honest about your personal financial goals and stick to a realistic and personalized plan, what other people do and think simply isn’t important. Your life, and your finances, your faith are unique. Romans 12:2 “Do not conform yourselves to the standards of this world, but let God transform you.”
Not being content
Unless you are as wealthy as Bill Gates, some people will always have more than you do. And that’s OK because other people will always have less than you do. Be happy with what you have, learn to be content and you’ll never be in need. 1 Timothy 6:8 “If we have food and clothing, we shall be content.”
Buying whatever you want on a whim wastes tons of money. If you need to get control of impulse spending, use a wish list for any purchase that is not a basic necessity. Write down the current date and the item you want. Get 3 prices. Wait 90 days. If you still want the item after 90 days and if you have the money saved, then buy it. BUT if you find something else you want, the whole process starts over. Write down the current date and the item you want … Get 3 prices … Wait 90 days …
Suffering from Inertia
If you aren’t sure what to do, it’s easy to get paralyzed and do nothing. If you are trying to figure out what to tackle first and how to get a handle on your finances, take the Navigating Your Finances God’s Way Bible study or read the free Your Money Counts eBook. Both are available from the Store page on the Compass Catholic website.