I know that money matters, Do you? I think that everybody makes mistakes, and when it comes to money nobody is perfect. Many Latinos out there like me are oblivious to money management like I used to be until a few years ago when I grasped the concept of financial independence. I learned from my mistakes, I changed my mentality, and I took action to turn things around. Speaking from experience I know that sometimes we all need to experience things and make mistakes to learn our lessons.
I have put together this 5-item list of the top most important mistakes that people make with money, and I would like Latinos to know so they know and think about their finances and judge their personal situation. If you can avoid these mistakes you will most likely be fine and in the right path to a healthy financial life.
1. Living Beyond your Means. I believe this is the number one mistake that most people make regardless of their income. If you spend more than you make, you are in trouble. It’s basic finance. If you make $30,000 and you spend $31,000 you are in debt and in trouble.
Now, if you make $30,000 and spend $28,000 you are ahead, which means savings. I know that is difficult living within one means, but you’ll never be at ease and have freedom if you spend more than you make.
2. Carrying too Much Debt. I hate debt. How do you like to have money in the bank for 1 day and then nothing, nada because you just paid all the bills? The only debt you should have is a house, period. But I know that if you don’t need a house that is 5 beds and 4 baths for $500,000 don’t buy it. Buy the one smaller one for half. I know that us Latinos like to have big houses because we like to keep family around. Some of you may be thinking that you’re saving money in the house, but that is only true up to certain extent. Keep the debt % low.
3. Not Having an Emergency Fund. If you don’t have this emergency fund for when stuff hits the fan, you are in trouble. Tapping into your 401K is not an emergency fund. When you get fired, or sick you need some cash to get buy while things get back to normal. An emergency fund is about 3 months worth of expenses. So if you don’t have an E-fund, you need to start one right now. By the way Credit cards are not a “Emergency fund.”
4. Lack of Savings. This is a big one, most people owe so much money that they can’t even afford to save any of their money. The savings rate in the U.S. is very low, and that is why people are living the paycheck way. Even If you have credit card debt or student loans, you have to save some money. Have you heard of paying yourself first? You can save automatically to an online savings ING Direct account like if it was another bill, but is not, it’s a savings account.
5. Not Having a Budget. Make a budget if you don’t have one. The reason that most accountants and bankers have money is because they track every single penny very well with a budget. If you want to have savings and some money, you better create a budget. Not having one is a risk. It may seem like a lot work, but if you work hard for your money, you should work hard to keep it.
I always tell all my friends to save money, I know that money is important to Latinos as it is for everybody else. Avoid these mistakes and get on the right path to a good financial life. And if you ever notice credit problems arise, be proactive and seek help. Do your research, so you find credit repair services that fit your needs.