Sunshine, surf and vacations are great ways to enjoy your upcoming summer, when you can relax and recharge your internal batteries.
However, don’t think for a moment that summer is about tuning out and ignoring your obligations and financial best practices. When you lose sight of the hard work you’ve put in trying to take control of your finances, be careful. You can easily slip back into old ways, and lose precious financial momentum.
I want you to put some serious thought into these 10 common financial mistakes many people make during summer, so you can avoid putting yourself in a bad financial position.
Mistake #1. Going on vacation and not sticking to your monthly budget.
For some reason, people seem to think when summer comes around, it’s okay to forget about sound spending habits and sticking to your monthly budget. You may work hard all year round to stick to your budget. Yet when you ignore your budget for the sake of having summer fun, you can quickly find yourself back where you started financially in the fall. Be strong and you can find yourself making gains instead of losses every month of the year.
Mistake #2. Not making bill and debt payments on time.
Another thing you work hard to make better during the year, yet may forget during summer, is paying down your debt and improving your credit score. If you’ve ever had not-so-good credit, and worked hard for a long time to achieve good credit, then you go on summer vacation and forget to pay your bills on time, you are shooting yourself in the foot financially. An easy way to make sure you don’t pay bills and debt payments late is to automate your payments. It’s easy to set up, then you can forget about the world for a month or so, while your bill payments are made on time automatically.
Mistake #3. Not contributing to your retirement fund regularly.
Did you know, that in many cases, when you contribute to your retirement fund, your employer matches your contribution? It’s true. Knowing this, why would you not make sure you are contributing to your retirement each and every month, even when you’re on summer vacation? Instead of forgetting this while on vacation, set up an automatic payment or debit that sends money into your fund. Whether it’s summer or winter, you can grow your retirement funds.
Mistake #4. Not having an emergency fund.
Are you going on summer vacation, and using your savings to do it? While you may have a good time, what happens if an emergency arises and you don’t have the cash to deal with it? If you don’t have an emergency fund right now, start one today. If you do have an emergency fund, remember what that account is for… emergencies only. When something serious does arise, you will have peace of mind that you have the cash to handle it.
Mistake #5. Not paying off your credit cards in full each month.
It can be easy to rack up more debt while you’re on a nice summer trip. While it’s fine to put trip expenses on a credit card, you have to be careful. Many have good intentions about paying off their vacation when they return home. Other things can pop up, and before you know it, you’re paying the minimum payment, and the expenses you put on your credit card now start to grow and grow. Don’t get caught racking up credit card debt. Commit to paying off your vacation in full when you get home.
Mistake #6. Not building a detailed financial plan.
Do you know where your money is going each month? Do you spend without even thinking about it? Do you find it difficult to save? If so, having a financial plan will help. Without one, you will find it difficult to become debt-free, and you may see that at the end of each month, you have more month left than money. Making a sound financial plan does not have to be complicated or difficult. Your plan will guide you with how you spend your money, how you manage your bills and how to always have money that is working for you.
Mistake #7. Using emotion to buy or sell investments.
Speaking of having your money work for you, many think if they just dump some cash into investments, someday they will be rich. Not only is this not likely to happen, you will almost never be successful with this approach if you let your emotions guide your investments. Instead, you need to do your homework, so you can make informed decisions. Having the guidance of a qualified financial planner can help you put your money where it has the best chance of growing. This will also help you avoid losing your hard-earned money due to poor investment practices.
Mistake #8. Failure to update all of your insurance coverage.
Insurance is one of those things people believe you can set up once, and you never have to look at it again. The fact is, as your life and your family situation changes, it is likely your insurance must be updated to reflect these changes. If you go on a long summer vacation without consulting your insurance agent first, you may put yourself in a position where you are not covered for certain things, like your car and traveling, and your home being left alone unattended while you go to Disneyland. Check in with your insurance agent a few times a year for a check up.
Mistake #9. Failure to diversify your income and investments.
When you were a child, you may have heard your parents tell you… “don’t put all your eggs in one basket.” Though sage advice, many people today ignore it. So what does diversifying your income look like? You have streams of income from different sources, like having a job and a home-based business. What does diversifying your investments look like? Identify “growth funds” that increase your wealth, and income funds designed to deliver spendable income when you’re nearing retirement. A balance of both means you have a healthy investment plan.
Mistake #10. Not taking the time to educate yourself on financial matters.
Going back to childhood days again, remember the cartoon ostrich that would stick his head in the sand whenever trouble was near? Well some people today approach their financial matters the same way. It pays to take the time to get “financially literate” so you understand how to navigate the financial landscape.