Estimated reading time: 14 minutes
Avoid common money mistakes and improve your basic money management skills. Learn how to effectively manage your finances to avoid debt and financial stress.
Fix Financial Failure By Finding Your Mistakes
Poor basic money management skills can be a large part of why people go into debt.
Today, I want to explain why common money mistakes include couples who can’t seem to get it together.
Earlier this month I blogged about How Poor Money Management can affect your lifestyle which seemed to be a heavy-hearted topic for many readers.
Over the last eight years of sharing our financial journey on this blog, we’ve realized that we have also practiced poor basic money management.
It wasn’t that we were spending more than we earned.
Instead, we weren’t managing our net income to full capacity.
For those of you reading this who feel you are struggling with basic money management skills, understand that you have to start somewhere.
There is never a wrong time to get your finances in order, and for many, the start of the new year triggers a reaction.
After the Christmas holidays and the expenses associated with them, some people fear getting their credit card bills.
This is why I like to review debt management at the end of the year to kick-start financial priorities for the following year.
Basic Money Management
What causes poor basic money management?
Not managing your money can ripple effect on your finances, especially when you miss a bill or loan payment.
The costs involved with interest and missed payment charges alone can quickly snowball into a disaster.
Once this happens, your credit score may take a nosedive as any missed payments are reported.
This may limit the amount of credit you can get in the future or even secure a mortgage if you want to purchase a home.
Some people take the credit card balance transfer option, but you can flush that 0% interest down the toilet if you miss a payment.
Unreal expectations when it comes to finances also can spike poor money management.
For those of you who buy things with the expectation that your next income deposit will cover the expenses, find this often is not the case.
Budgeting And Basic Money Management
When I think of basic money management, I consider that to be the bare bones of taking care of your money.
It’s better than nothing.
Household financial management has to start with goals followed by a monthly budget.
There was a time when I thought I had managed money to the point that I was reaching my savings potential.
Every time I got paid from work, which was bi-weekly, I would pay my bills, and anything left over went to savings.
The goal was to sell my house and buy a better property elsewhere in the UK.
I had no goals or financial information written to entice me to reach my dream home faster.
At that point, I didn’t know where my money was going and how much was being spent.
It wasn’t until I married Mrs. CBB that we created a budget that blew us out of the water.
At the end of the first year in 2012, when we reviewed our yearly figures, there were budget categories we knew we had to reduce.
Finding Hidden Savings
For example, our telecommunications budget was over $3000 yearly or $256 monthly.
That cost encompassed home phone, cell phone, cable, and our internet services with Rogers.
I know some of you who are with Cogeco Cable might think that’s a bargain if you don’t have Rogers available in your area, but it’s still outrageous.
My mother-in-law’s telecommunications bill with Cogeco cost her $3840 a year, with no cell phone included.
After we took over her household expenses and made some phone calls to Cogeco, we realized how sad the situation was for their customers.
Ditch Telecommunication Expenses
You don’t get near the discount that Rogers will offer their customers, although we managed to lower the costs by asking for a bundle discount.
Some customers may think it is an automatic bundle discount, but they may not give it to you if you don’t ask.
We’ve lived in our house for 10 years now, and our Rogers bill is only $180 monthly, including Mrs. CBB’s cell phone.
Prices for telecommunications for our budget have dropped since we negotiated with the retention department, which we never used to do.
At one point, we would like to ditch our home phone and cable and stick with Rogers’ unlimited internet.
It sounded great until they told us we could keep our services, including the internet, for a few dollars more.
For now, we are holding on to what we have but the main point is knowing where your money is being spent.
- Are you confident you are getting the best discount each month?
- Can you eliminate the expenses that you are paying?
Mortgage Insurance vs. Life Insurance
Another example could be someone who is paying mortgage insurance on their mortgage yet has life insurance for far less.
You don’t need both.
I’d never suggest anyone get mortgage insurance unless they cannot get life insurance.
That’s just my opinion since mortgage insurance only pays out what’s remaining on the mortgage when you die.
Life insurance, on the other hand, pays your beneficiary the total amount of your insurance coverage.
Another expense we noted when taking over the inlaws’ finances was that they were paying bank fees for an overdraft they did not use.
All these hidden expenses add up, so when someone says they are struggling, I often suggest digging deep to see what they can uncover.
Basic Money Management For Couples
Managed money between couples is probably the hardest for anyone to blend due to differences of opinion.
Household financial management, working, caring for kids, and maintaining a residence can be overwhelming.
Most often, couples asking me for budget help put their money management aside because it’s the easiest way to drop from the list.
Time and money management means you have to set time aside to budget or don’t end up doing it.
I’ve seen it and heard it countless times, where people feel they don’t have the time to budget.
You Need A Roof Over Your Budget
I like to compare budgeting to living in a house without a roof.
What would happen if it rained?
That’s right, everything would get wet and ruined, which is why you need a roof.
A roof protects your real estate investment as well as the assets you have in your home.
The same goes for budgeting as it becomes a necessity to make sure your financial estate is in order.
Sadly, as time passes, expenses continue to burden couples as they spend more than they earn.
This puts them in a position where they only pay minimum payments on credit card debt or are using them to pay the monthly bills.
It’s crucial before you get married or get into any relationship that money be a topic that you discuss.
If the person you are potentially going to spend the rest of your life with has an issue with that, walk away.
That might sound like a cruel thing to do, but money is the number one reason couples split up.
It may not be that they are broke, but one or the other builds resentment due to spending habits or earning potential.
Basic Money Management Spreadsheet
The best way to keep track of expenses is to use a budget I offer free on CBB to all my subscribers.
You can download the basic budget, a pen and paper budget, and keep it in your budget binder or our basic budget Excel spreadsheet.
Update: Subscribers to CBB get a copy of my free 51-page Budget Binder.
I describe our Excel sheet as fundamental because you can edit the budget as you see fit and according to your lifestyle.
I didn’t add anything fancy to the Excel budget.
You don’t need only financial information that will help you understand three things;
- Where your money is going?
- How much money you are saving?
- How much debt do you have?
Many other free printables I offer will help you start to manage your money and get off the debt track.
Documents you manage, such as credit card debt, debt repayment tracking, money savings chart, daily budget expense tracking sheet, and a monthly bill payment schedule, are all free.
If you are looking for basic money management tracking forms, these will get you on your way to making sense of your cents.
Creating a budget binder is not something that everyone does, but it’s undoubtedly a frugal way of tackling your debt.
You don’t need to buy expensive budgeting apps or any fancy online budgets created by other bloggers.
Stick to the basics, and that’s all you need. Don’t fall for the hype. It’s nothing more than a money grab.
8 Signs Of Basic Money Management Struggles
Sometimes the signs of failing at basic money management aren’t clear until you have no money left to pay your bills.
Understanding the root cause of your financial difficulties is more about taking responsibility than sweeping it under the rug.
Let’s have a look.
1. You Blame Everyone For Your Financial Problems
Blame-shifting always seems to come up when people are broke.
This could be anyone from the government cheating someone to credit card companies not sending the bill on time.
Whatever or whoever you think is responsible for your money problems means nothing to the person you owe.
Get your stuff together, and instead of wasting time calling out people or organizations, figure out ways to get out of debt faster.
2. You Fail To Review Your Banking
If you are like most people and bank online, automate all your bills, and seldom look at your bank account, you’re in trouble.
This was our downfall, and we’ve been caught in the red by not having enough money to cover expenses.
I advise reviewing your bank accounts weekly and setting up notifications on your mobile phone or computer.
Doing this lets you see when your credit cards incur charges or money is withdrawn from your bank account.
It also doesn’t hurt to go visit your financial institution or call them to see if you can find ways to save money on your monthly fees.
Simplii Financial is free, and some banks offer free banking if you keep a certain amount of money in the account, but not all.
Also, if your bank charges you to buy cheques and it’s outrageous, consider using an online company such as Cheques Plus.
We’ve used them, and the service and prices are far more competitive than Canadian banks.
3. Credit Cards Are Used As Real Money
When you have an empty wallet and your bank account screaming to be fed, you have a bit of a problem.
What is the smart basic money management thing to do?
Basic money management suggests you should always have savings as a backup plan.
If you use credit cards to get by monthly, you must seek financial help.
This is no way to live; it will only push you deeper into debt.
For those who want to retire without debt, this isn’t a smart way to start that journey.
4. You Consume More Than You Save
We all know where most debt comes from: spending more than we earn.
If you are a shopaholic and struggle to say no to spending money you haven’t yet earned, you’ll know about it.
Basic money management problems start with small debts that snowball into significant debts and fast.
Stop spending, start saving, and understand how important it is to lose debt and gain financial confidence.
5. You Need To Borrow Money
Borrowing money is a big red flag regarding basic money management problems.
If you need to borrow this should tell you a few things;
- You don’t have enough money in the bank
- There is no money in the bank
- You can’t afford what you are buying
- Living on the edge financially is a surefire way of finding yourself without a roof over your head.
6. Not Accounting For Non-Monthly Budgeted Expenses
Those expenses that pop up once or twice a year that you don’t save for every month will catch you off guard.
I’ve blogged about projected expenses and how you must be on top of these, even with a basic budget.
Throughout the year, you may accumulate new services or expenses that you don’t have to pay right away.
For example, you may pay someone to prepare your income tax return at $100 a year.
If you don’t have that $100 come tax time, you may have to find free services if available or complete your income tax return.
If you aren’t sure how to do it alone, you may miss valuable tax perks, which cost you more in the long run.
The idea here is you save whatever the expense is divided by 12 months in your monthly budget.
You’re saving money for something you have yet to pay for, but you know you will have to pay for it.
You set that money aside in a separate bank account, and when the time comes that it is due, you have the cash to pay for it.
Using a credit card, overdraft, or a loan to pay for expenses you should be budgeting for is a big no-no.
7. Pantry Runs Dry
Something is wrong when your refrigerator is bare and you must visit the food bank.
The cost of living in Canada is high, but so is the debt consumers are taking on.
If you are paying too much for your bills and debts and struggling to keep food on the table, perhaps a budget review is in order.
No one should ever have to go without food, and it’s hard to fathom, but it happens worldwide.
Here is a quick example and I’m not saying this is everyone.
- Cell phone with data $120 a month.
- No money left for food at the end of the month
- Basic cell phone $30 a month or use a home phone for less.
Many non-essentials are where people are dropping their cash and unfortunately, have to be modified or cancelled.
In 2018, older people using Ontario food banks jumped by 10%, a staggering amount.
It’s a growth rate nearly three times faster than that of the province’s senior population, stated the Ontario Association of Food Banks (OAFB), and it marks the beginning of a trend that’s expected to continue.
I spoke with a woman whose mother drank so much that they never had food to eat, and the electricity had been turned off numerous times.
Although this is heartbreaking addictions are costly and most times at the expense of family members.
If you are fortunate to have money to buy groceries always consider donating to the food bank or local charities for those in need.
8. Spending Money On Dreams
This is an area where many people have visited because it’s called a success trail.
What this means is that we get ideas in our heads to make more money or to become successful without a back-up plan.
If you want to go into business for yourself or plan to become the next entrepreneur of the year spend your money wisely.
Creating a vision and not following through on it because you lack the fund or have spent money on something that will never happen is bad money management.
I’m sure some of you can attest to doing this or having a partner who has or is doing this.
For example, purchasing a second house to flip but not having the money to pay for the renovations.
A dream to renovate and sell is a vision of lots of real estate investors, but going in with blindfolders and an empty account is only asking for trouble.
Then you find yourself back up at number five above looking to borrow money or putting the debt on credit cards.
Find The Problem And Solve It
When you’ve gone through all of your money concerns and still find you are struggling with a basic money management plan it’s time to talk to a professional.
I don’t mean this in a bad way but having the stress of debt on your shoulders can cause a multitude of feelings including depression and health problems.
Finding a professional financial advisor who can work with you and offer suggestions for your situation is never a bad idea.
Best of luck.
Discussion: What basic money management problems have you found and fixed in the past?
Share your comments below as I’d love to hear your experiences.
Thanks for reading,
Mr. CBB