Finance
Top 10 Most Common Financial Mistakes
September 2, 2021
May 17, 2022
Whether you’re paid once a week, once a month or somewhere in between, you should always aim to make the most out of your paycheck.
Next, consider upping the percentage you contribute from each paycheck. Experts typically recommend 10% or more, if you can afford it. In addition to helping you save for retirement down the line, putting as much as you can in your 401(k) has the added benefit of lowering your taxable income.
If you earn $50,000 per year and contribute 10%, or $5,000, of that to your 401(k), your taxable income is reduced to $45,000. When you do decide to withdraw your money in retirement, you will pay taxes at whatever tax bracket you qualify for at the time.
2. Take care of your savings
With your long-term retirement savings handled, the next thing you’ll want to do is contribute to your shorter-term savings. Financial experts recommend automating this process so that funds are deducted straight from your paycheck before you get a chance to spend them.
The popular 50-30-20 budget strategy recommends putting 20% of your income toward savings and investments if you can afford it. But no matter the amount you can contribute, make sure to automate it so that you don’t end up spending it first.
3. Budget for your fixed expenses
Lastly, review your budget and note how much you’ll need to spend on fixed expenses like rent, utilities and insurance. Is your spending on track to let you cover those without carrying a balance on your credit card? If not, adjust accordingly.
This includes staying on top of any debt you have. Prioritizing debt payments will prevent you from falling behind and owing additional interest.
Once you’re sure that your essentials are taken care of, you can spend the rest of your money on whatever you want with the peace of mind that your budget is in good shape.
