Whether good or bad, there are natural consequences to your financial decisions. If you save for retirement diligently and stay out of credit card debt, your nest egg will thank you down the road. However, if you make foolish, some might say, "stupid" financial decisions, it will hurt--and it should hurt. If it didn't sting, behavior would never change and the cycle of poor financial choices would continue forever. Here are some glaring examples of faulty financial decisions hurting consumers the most:
Wasting your tax refund. If you are getting a tax refund this year, don't go blowing it on something material just because you think you deserve a treat. Guess what: it isn't free money, nor did you win the lottery. It simply means you overpaid on your taxes throughout the year. Adjust your tax withholdings with your employer and keep more of your money. The smaller your tax refund, the better.
Not saving enough for retirement. If you think the government is in business to fund your retirement through the Social Security system, think again. With the program's future being unpredictable, take responsibility for your own retirement and begin planning by adding money to a Roth IRA. Even if it is only $25 to $50 per paycheck, start now and let the power of compounded interest work for you.
Paying full price. If you fail to shop around for the best price or don't take the time to do a quick search for an online coupon before making a purchase, you deserve the natural consequences of bigger credit card bills and less disposable income. Also, it's important to get out of the mindset that new is better. Develop the smart financial habit of buying used items from places such as Craigslist, eBay. garage sales, and thrift stores.
Trying to keep up with the Joneses. Another incredibly poor financial decision is to maintain your lifestyle in accordance with your neighbors and buy more than you can afford. Ironically, oftentimes the Joneses are just as broke as you and are doing a juggling act between credit cards and ramen noddle meals. Be careful who you are envious of, as it may be nothing more than smoke and mirrors.
Ignoring financial fear. That feeling in your gut when you open the mailbox to a stack of bills, or when you jump when the phone rings because debt collectors have been harassing you, is nothing more than fear--and it sucks. But you shouldn't let your emotions impair your financial future. By making good money decisions and owning your mistakes, you can start to secure the natural consequence of peace of mind and the elimination of financial fear.
The bottom line. The big question comes down to how do you save money, live frugally and avoid the pain of stupid financial decisions? The answer is simple: You just do it. It will be hard, but hard is not a good excuse for squandering your finances. I can hear the comments now, "This advice is great if you make a lot of money." However, people with a lot of wealth have nothing to do with you and your situation. Start making good financial decisions for yourself, live within your means and enjoy the benefits that come with good money habits.
Kyle James owns and operates Rather-Be-Shopping.com and blogs about frugal living, couponing tips and ways to make your paycheck go as far as possible every month.