If you are living paycheck to paycheck, then you suffer the recurring financial stress of not having enough money to cover all your monthly bills. Although you are far from alone--a Bankrate survey found that most Americans can’t cover a $1,000 emergency—sharing this problem with millions of others provides little comfort.
Still, there are five common mistakes that you might be making that could save you money or that could help you get more value out of the money you spend.
Mistake #1: Buying Too Little
If you have a limited income, it’s natural to become frugal. While this might serve you well in most situations, it will cause more harm than good in others.
An example of this is car insurance. It’s a mistake to decide to lower the cost of your premiums by buying less coverage. Under-insuring is always a dangerous thing to do. Here’s the thing: even if you have had several infractions, such as DUI convictions, you can still get insurance for high-risk drivers.
Paying premiums, even higher premiums, is never a waste of money. Although getting a good insurance policy may cost you hundreds of dollars a year, not having enough insurance could mean that you cannot repair or replace your car if you have an accident.
Mistake #2: Overpaying on Recurring Bills
There may be some bills where you pay more than you need to to get the same service.
An example is your household energy bill. It’s possible to slash your energy bill without compromising your service.
You can save by using a programmable thermostat, by adding extra insulation to your home, and by replacing your air filters.
You can also save by washing all your colors, dark and light alike, in cold water, by strategically using your appliances, and by lowering the temperature of your water heater.
Mistake #3: Not Knowing Where the Money Goes
If you’re not a spendthrift, you might wonder where your money goes every month. Although you have a good idea about your daily, weekly, and monthly expenses, it might surprise you after you track your spending that you’re not managing your money as well as you thought.
If you don’t like the idea of creating a budget, an alternative option is to use budgeting software. You could, for example, use the Mint.com app. It’s a free app that lets you synchronize your PayPal, bank account, or credit card accounts with your bank accounts. It will even alert you about upcoming bills.
Mistake #4: Not Paying Yourself First
Paying yourself first means setting aside a small amount of money from each paycheck, 10% or less. Interestingly, you will hardly notice the absence and you will gradually build a savings account. You can later use this money for investments.
Unless you’re a CEO of a multinational, a brain surgeon, a movie star, or have some other well-paying line of work, you’re unlikely to get wealthy from your salary alone. For most people, wealth creation only starts when their money makes money.
Mistake #5: Not Appreciating Your Money
If you have a resentful attitude toward money or entertain negative beliefs about it, then this will have an adverse psychological effect on your ability to earn more of it, spend it wisely, and invest it successfully.
If you appreciate your money, it will appreciate in quantity. In fact, anything you appreciate increases and everything you resist persists. So, start appreciating your money rather than resisting it.
It’s hard to feel motivated to earn more or to manage your money better if your subconscious mind views it with suspicion. One way to appreciate your money is to think of the many ways it serves you. Also, consider buying yourself small treats to reward yourself for all the hard work you do to earn it.
By correcting these five mistakes, you’ll notice that you’ll have more money available at the end of each month.