1. Not including savings in your monthly budget. Because it’s not in the budget, it is more likely you will not be able to do it. To avoid committing this mistake, deposit the whole amount of your paycheck into your savings account. Transfer the amount you need to spend into your checking account, minus the amount earmarked for savings.
2. Placing your savings in unsecured places at home. The most secured place for your savings is your savings account. Plus the fact that money kept in the bank earn interest monthly. For a more detailed discussion of this point, see last week’s blog post.
3. Keeping the checking account and the savings account in the same bank. It is advisable to keep your checking account and savings account to avoid the temptation of tapping your savings. As a guide, interest should be your main consideration for the savings account; while for the checking account, look for what is convenient to you.
4. Running after introductory rate offers. Introductory rate offers are always high. But that is only up to a certain point. When the promotional period is over, the rates begin to plummet.
5. Failing to label the different purposes of the savings. It is not wise to lump all the savings into one account. You can prevent using other savings when they are set aside for a specific purpose. For instance, savings earmarked for buying a new car might be used for emergencies.
6. Saving without a specific goal. Any undertaking without a specific goal is doomed to fail, and that includes saving. Goals provide motivation, especially goals that are time-bound. Each dollar you place into the savings contributes to reach the goal.
7. Using the savings to pay maturing debts. Using your savings to pay maturing debts can push you deeper in debts when an emergency arises. Saving and paying maturing loans should not go together. Pay off all your debts before setting aside cash for your savings.
8. Using the emergency funds for non-emergency situations. Emergency funds are set up for emergencies. They should not be used for vacations, to purchase a new laptop, or make a down payment for a home. The funds should be used for medical expenses or to support your family if you lose your job.
9. Living beyond your means. Your lifestyle should keep pace with your earnings. Saving will never be possible for people who spend more than what they earn.
10. Not starting now. The biggest saving mistake of all is not doing anything about it.