Saving money is an important thing to do. Aside from just having money set aside for a rainy day or unexpected expenses, a pattern of saving over the course of a lifetime can ensure a comfortable retirement. But not sticking to your savings, or ignoring your budget, can cost you both in the short term and the long term. There are three big financial mistakes many people make that can derail their ability to accumulate wealth.
Spending Budgeted Money on Themselves
Many of the best savers establish a budget, keep their purchases within that budget, and save whatever money is left over. That means budgeting a portion of each paycheck to pay for rent, utilities, food, etc. But many people end up not sticking to that budget and using money that they’ve already budgeted for something else in order to make a selfish purchase.
That’s particularly prevalent among millennials, 1 in 3 of whom have done that. Millennials are twice as likely as those from Generation X to use the budgeted money to buy something for themselves, and eight times likelier to do that than baby boomers.
Excessive or Frivolous Spending
This is another one that can quickly derail your savings. Spending money that you don’t have, putting it on a credit card to be paid off in the future, can lead to an endless cycle of debt. Nearly a third of millennials have said that they are prone to excessive or frivolous spending.
That’s not surprising, as many of them have grown up during boom times and haven’t had the experience of getting laid off or having to scrounge to make ends meet. They think the good times will go on forever and don’t think about saving for the future. Only a quarter of Gen Xers report spending frivolously, and only a fifth of baby boomers.
Hiding Purchases From a Spouse or Partner
Financial issues are one of the primary factors leading to the breakup of marriages. When spouses aren’t on the same page on spending it can lead to a lack of trust. If one partner is a saver while the other is a spender, financial matters will always be a wedge between them. And if one partner finds out that the other has been spending behind the other partner’s back, that could have serious repercussions.
Here too, millennials behave differently from older generations. Nearly one-quarter of millennials admit to hiding purchases from a spouse or partner, versus 17% of Gen Xers and only 8% of baby boomers.
While avoiding the three financial sins mentioned here won’t guarantee that your savings are squared away, it is indicative of a desire to budget, save, and stick to those plans. That’s the first and most important step you can take to safeguarding your financial future.