3 Mistakes That Cost Me Thousands of Dollars in Q1 and How I Fix Them
- Over the past year, I have developed strict budgeting and saving habits that have helped me increase my net worth.
- But in the first quarter of this year, I stopped these habits, thinking that I would naturally continue them in 2022.
- Ignoring my credit card bills and my budget, and holding on to too much money, has cost me thousands of dollars.
One of my biggest goals for 2022 was to continue to grow my
financial decisions. However, when I looked back at the first three months of the year, I realized that I hadn’t done much to make those things happen.and make smarter
While I spent most of 2021 sticking to a strict budget and changing my spending habits, I started 2022 a little more carelessly. The mistakes I made ended up costing me thousands of dollars. Since I caught most of these issues early in the second trimester, I’ve been working hard to make some practical changes so I can spend the rest of the year getting back on track with my financial goals.
Here are the mistakes I made in the first trimester and what I’m doing now to fix them.
1. Not checking my credit card bills
During the first few months of the year, I ignored the calendar prompts I had set up in advance reminding me to do month-end audits on my credit card bills. These meetings were meant to be stop signs that I could use to identify areas where I was overspending and unnecessary purchases.
But since my schedule was too hectic and I felt too lazy to do it on the weekends, I simply cut out the time allotted to review my credit card statements. This is one of the factors that led me to have credit card bills 15% higher than in 2021.
To prevent this from happening for the rest of the year, I put those credit card review sessions back on my schedule and implemented a reward system. If I do these audits to analyze my expenses, I treat myself to lunch at my favorite local café. If I don’t do those audits, I’m not allowed to set foot in that cafe for 60 days. So far, this system has held me accountable.
2. Ditch my budget
At the start of 2021, I designed a strict budget, based on my realistic spending categories and savings goals, which I tracked monthly throughout the year. I stuck to that budget by tracking expenses daily and reviewing my finances weekly.
This year, I felt like I didn’t need a budget and assumed that the good habits I picked up last year would stick with me. I was wrong. I spent the first three months of the year not tracking my expenses on a daily or weekly basis and found myself upset at the end of the month seeing how much money I had wasted.
I noticed that between January and the end of March, I spent $2,500 more than this time last year. Without a budget, I found myself spending more freely on shopping, eating out, treating myself to extra activities while on vacation, and even picking up small items that I didn’t really need on a daily basis.
To help me get back to following a budget and spending less money, I reinstated two days without a credit card during the week (where I only spend money or I don’t spend money at all) and I track my expenses on a daily basis. Every night before I go to bed, I review all of my purchases for the day and update my budget to see how much I have left to spend for the rest of the month.
Even though it’s a lot of work, I’ve noticed that it helps me connect with the good habits I’ve learned over the past year that save me money each week, preparing meals to avoid having to take out, having a fixed amount of money to spend each day so that I have control over my finances.
3. Keeping too much cash in my savings account
One of the biggest financial mistakes I’ve made for several years now is keeping too much cash in my savings account.
While some financial experts say you should only have 10-20% of your financial portfolio in cash, my breakdown of cash is closer to 45%. Even if that money is in a high-yield savings account, some of that money might have been better off growing elsewhere.
For example, if some of it went into a CD with an APY of 1-2%, it would earn a lot more over time than it currently does in a savings account. Or if it went into my SEP IRA retirement account, it might earn more in the market over time than it currently does.
Even though a big part of the reason I keep so much of my money in a savings account is for a sense of security, I realize that it’s costing me thousands of dollars every year. That’s why, over the past few months, I’ve started strategizing what to do with the extra cash and transferring some of it to a brokerage account, CDs, and my retirement account.