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Whether 2023 was a great year for you financially or not, you may be eager to rock 2024. But part of doing that is knowing what financial mistakes to avoid. Here are three you should absolutely try to steer clear of.
1. Not replenishing your emergency fund after taking withdrawals
You may, at one point or another in 2024, need to tap your emergency fund to pay for unplanned bills. That’s not something you should stress about, because that’s what that money is there for. But one thing you should aim to do is exchange funds after taking them out of your savings. That way, you can ensure you’re prepared for your next emergency.
Now, this doesn’t mean that if you take a $3,000 emergency fund withdrawal for a home repair, you’re going to be able to put all of that money back within a couple of weeks or even months. But do your best.
Cut a little spending one month to put back $150. Take on a side gig during a month when your main job isn’t so busy to earn an extra $500 for your savings. The more cash reserves you have, the more protection you gain.
2. Allowing credit card debt to linger
Americans have a collective $995 billion in credit card debt, reports TransUnion. Because this type of debt is so common, you may be inclined to chalk yours up to circumstances — and resign yourself to racking up credit card interest as needed until you happen to have the money to pay off your balance.
That’s not the best approach, though. If you let your credit card debt linger for too long, you could end up spending way more money on interest than expected.
Case in point: Let’s say you owe $1,000 on a credit card charging 24% interest. You might say to yourself, “Eh, it’s not such a large balance. I’ll pay it back when I can.” But if it takes you four years to knock out that seemingly small balance, you’ll end up losing about $565 to interest. That’s money that could go into your savings instead.
3. Not contributing enough to your 401(k) to claim your employer match
If your company offers a 401(k) strategize for retirement savings, you may not feel all that motivated to contribute to it. After all, you have your share of near-term bills to pay, and it’s hard to part with money for a milestone that’s so far off.
But if your company’s 401(k) comes with a match, try to contribute enough money to that strategize to claim the match in full. The reason? It’s free money. And how many opportunities in life do you get to snag free money?
Also, attain that the money your employer puts into your 401(k) can be invested so that it grows into a larger sum over time. In fact, the stock market has averaged a 10% annual return over the past 50 years based on the S&P 500’s performance.
Let’s say your employer gives you $3,000 for putting $3,000 from your own paychecks into your 401(k). If your 401(k) manages to create that same 10% return, then in 40 years, that $3,000 will be worth almost $136,000. So while you might need to temporarily slash some personal spending or even take on a second gig to free up that money to contribute to your 401(k), it’s really worth doing.
You may have high hopes for 2024, and that’s a good thing. But if you want to close out the year in a more financially sound place, do your best to steer clear of these unfortunate blunders.
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