These Money Mistakes Are Costing You Thousands
We're a generation that's glued to our phones—the average millennial checks their screen 150 times a day—but despite our constant connectivity, the majority of those glances are dedicated to social media, rather than our bank balance. When it comes to day-to-day spending, a massive 65% admit they don't keep an eye on their bank account to stay abreast of charges.
The issue with only scrutinizing your finances during key milestones like tax time or before a big purchase is that you're likely missing out on crucial subtleties. In reality, hundreds of small daily decisions contribute to our bank balance, and something as seemingly insignificant as your ATM choice or that unused subscription service could be the reason you're struggling to save.
To find out about the most common money mistakes, be it daily spending habits or a skewed financial mind-set, we gleaned new data and spoke to Allison Engel, director of women's market strategy at Northwestern Mutual. When left unchecked, these under-the-radar money mistakes could cost you thousands.
When you glance over your checking account statement, it's easy to look past recurring costs. That $10 monthly Amazon Prime membership might not seem like much, but when you couple that with other subscription services and in-app purchases, it can seriously add up.
A study published in The Journal of Consumer Research suggests there's a surprising disconnect between spending and its perceived consequences when you don't hand over physical cash. According to The Chicago Tribune, people who use cash focus on the cost of the transaction, while those who use noncash payment like credit cards concentrate on the benefits of the purchase. Translation: Paying with plastic and signing up to automated subscription services will make you spend more.
Signing Up to Subscription Services
Making Unrealistic Savings Contributions
The repercussions of not saving money go beyond your financial future; Engel says it's also an immense source of stress and anxiety. In Northwestern Mutual's 2016 Planning & Progress Study, 29% of women admitted that saving for retirement is a big source of financial anxiety, and according to an American Psychological Association poll, it's the number one stressor in America.
If you feel pressure to make up for lost time and supercharge your savings, Engel says there's one common mistake to avoid. "In order to get back on track, women often end up contributing higher amounts per month to savings, putting stress on both them and their wallets." Be realistic about your contributions and build an emergency fund into your budget. "For women who want to start aggressively saving, consider a side hustle—freelancing, selling crafts, tutoring, etc.—as a way to bring in additional income," she recommends.
The issue, it seems, is that we tend to underestimate fees and fail to regularly check our account to understand their impact on our bank balance.
"While 78 per cent of the 2,000 respondents said they had not read their bank accounts' terms and conditions, nearly 46 per cent believe they are aware of every fee their bank charges," the TransferWise report reads.
One of the top under-the-radar financial drains is ATM fees. According to the same study, 95% of Americans say the cost of using an out-of-network ATM should be $2. The reality? It costs an average of $4.52.
The takeaway? Review the fine-print fees charged by your bank for each account you hold, and make a conscious effort to withdraw cash when it's fee-free—whether that be during your weekly grocery shop or anytime you pass your bank's ATM. At the end of the year, you could have an extra $290 in your pocket.
FOCUSING ON THE PRESENT
We're an optimistic generation, but that mind-set could prove an issue when it comes to setting up our financial future—and preparing for the unexpected. Four in five millennials say they feel positive about the future, even though half live paycheck to paycheck.
"True financial security includes both protecting and growing your income," says Engel, who has over 15 years' experience offering women financial advice. "A strong plan balances these two priorities with a combination of saving and considering how products such as disability, life, and long-term care insurance fit within your financial plan."
That's not to say that you should change your rose-tinted outlook, but Engel says it's crucial to chat to a professional about how to protect yourself against unforeseeable issues. "Many working professionals receive group coverage from their employers; however, the average plan only covers the employee up to a certain level," she says. Don't underestimate the potential fallout. "Not having full coverage when you're not able to work is the equivalent of taking a pay cut—sometimes up to 40 per cent."
It's the curse of being young and carefree: No one ever thinks they will experience bad health. We've seen this reflected in data about emergency funds. According to Bankrate, a huge 63% of Americans don't have enough money to cover a $500 emergency.
Skipping healthcare costs won't be obvious in your daily bank statement, but it will hit you at tax time. Thankfully, if you're employed full-time your employer is likely helping foot the bill. If you don't have benefits, are a contractor, or aren't employed, there are some figures you need to consider to weigh your options. The current penalty for not having health insurance is either $695 per person or 2.5% of your household income. On the average American income, that could be a loss of up to $1298, purely because you didn't do your research.