5 mistakes to avoid when you start saving money

Before you go, we thought you'd like these...
Three Biggest Money Mistakes

We all love it when payday rolls around and the idea of using the influx of cash to buy a new pair of shoes or a round of drinks can be tempting. But it's not always the best idea. Sure, having a budget is like being on a diet (you have to treat yourself now and then or else you won't stick to it) but the key is putting some money aside.

If you haven't been saving your pennies, there's no time to start like the present. It may seem like a no-brainer, but there are some errors people make when they start saving.

Here are five saving mistakes to avoid to help you make the most of your nest egg.

1. Not Having an Emergency Fund

You don't really know how important this rainy day savings is until you need it and, by then it's too late. "This [emergency fund] is not your Christmas money, not your vacation money," Mary Hunt, the owner of Debt-Proof Living, said in an email. "This is for really big, horrible things that you cannot predict and can happen ... Unemployment, medical emergency or some other matter of life and death."

2. Not Setting Up Automatic Transfers

"Automatic deposits for savings straight through your payroll direct deposit is one of the best ways to save," financial educator Carrie Pink told Credit.com via email. "Money gets tucked away before you even have a chance to get tempted to use it."

You can have individual accounts that help you save – one for spending, one for your emergency fund, one for a savings goal like a vacation or house, etc. – and set up automatic transfers to each, if you'd like. You'll be happy you did this when you see you have enough to pay for your time at the beach without maxing out a credit card.

3. Ignoring Technology

"Budgeting and savings apps are packed to the brim with resources to help make money management easier," Pink said. "You can set alerts if you are going over budget, bill reminders, set automatic withdrawals and use categories so you can track every dollar." Consider using a free app so you don't take on an additional expense.

Related: The worst cities for saving money


15 PHOTOS
The Worst Cities for Saving Money
See Gallery
5 mistakes to avoid when you start saving money

15. Sacramento, Calif.

  • Population: 485,199
  • Median income: $50,013
  • Unemployment rate: 5.5%
  • Median home listing price: $530,000
  • Median monthly rent: $1,395
  • Average gas price: $2.223
  • Average cost of groceries: $42.94
  • Sales tax: 8.5%

The capital of California is more affordable than most of the states' major cities. But that doesn’t make it an ideal place for savers. Home prices still are high, and the median income in Sacramento is lower than the national median income of $53,482, leaving residents without a lot of wiggle room in their budgets to set aside money in savings.

Photo credit: Andrew Zarivny/Shutterstock.com

14. Bakersfield, Calif.

  • Population: 368,759
  • Median income: $56,842
  • Unemployment rate: 10.2%
  • Median home listing price: $245,000
  • Median monthly rent: $1,395
  • Average gas price: $2.35
  • Average cost of groceries: $35.68
  • Sales tax: 7.5%

The unemployment rate in Bakersfield is the second highest among the worst cities for savers. However, the median income of those who are employed is higher than many of the other cities on this list. Housing costs also are more affordable, which is why Bakersfield ranks lower than most of the other California cities that are the worst places for savers.

Photo credit: Gary C. Tognoni/Shutterstock.com

13. San Jose, Calif.

  • Population: 1,015,785
  • Median income: $83,787
  • Unemployment rate: 3.8%
  • Median home listing price: $725,000
  • Median monthly rent: $3,300
  • Average gas price: $2.38
  • Average cost of groceries: $40.95
  • Sales tax: 8.75%

The median home listing price in San Jose is the second highest among the worst cities to save. It’s also one of America’s most expensive rental markets, according to CNN. But a high median income — as a result of its booming tech industry — helps offset the high housing costs somewhat and doesn’t make it quite as hard to save as other places on this list.

Photo credit: Mariusz S. Jurgielewicz/Shutterstock.com

12. Long Beach, Calif.

  • Population: 473,577
  • Median income: $52,944
  • Unemployment rate: 5.4%
  • Median home listing price: $479,950
  • Median monthly rent: $2,197
  • Average gas price: $2.567
  • Average cost of groceries: $36.58
  • Sales tax: 9%

This city on the Pacific Coast is a slightly better city for savers than neighboring Los Angeles. But the median income in Long Beach isn’t high enough to offset high housing costs, leaving residents with little left over to save.

Photo credit: Jon Bilous/Shutterstock.com

11. Stockton, Calif.

  • Population: 302,389
  • Median income: $45,347
  • Unemployment rate: 8.8%
  • Median home listing price: $ 239,450
  • Median monthly rent: $1,300
  • Average gas price: $2.21
  • Average cost of groceries: $45.33
  • Sales tax: 9%

Stockton has two big strikes against it for savers: a median income that’s well below the national median income and a high unemployment rate. The city itself filed for bankruptcy in 2012 because fiscal mismanagement left it unable to pay its workers and fund the pensions of former city employees, according to Reuters. It emerged from bankruptcy in 2015.

Photo credit: Terrance Emerson/Shutterstock.com

10. San Diego

  • Population: 1,381,069
  • Median income: $65,753
  • Unemployment rate: 4.7%
  • Median home listing price: $589,900
  • Median monthly rent: $2,850
  • Average gas price: $2.488
  • Average cost of groceries: $37.79
  • Sales tax: 8%

National Geographic Traveler magazine selected San Diego as one of the best destinations in the world. It’s certainly a nice place to visit, but it can be a tough place to live if you’re trying to save money. Although the median income in San Diego tops the national median, high housing costs can make it difficult to have money left over to save.

Photo credit: Dancestrokes/Shutterstock.com

9. Fresno, Calif.

  • Population: 515,986
  • Median income: $41,455
  • Unemployment rate: 10.3%
  • Median home listing price: $219,900
  • Median monthly rent: $1,250
  • Average gas price: $2.314
  • Average cost of groceries: $33.95
  • Sales tax: 8.23%

The largest city in California’s Central Valley has the lowest house list price and lowest median rent in GOBankingRates' ranking of worst cities for savers. In fact, housing costs are lower here than half of the best cities for savers. The unemployment rate, however, is the highest of all cities on this list. The lower housing costs aren't enough to offset other expenses, so it's still hard to save money in this city.

Photo credit: Tupungato/Shutterstock.com

8. Miami

8. Miami

  • Population: 430,332
  • Median income: $30,858
  • Unemployment rate: 5%
  • Median home listing price: $459,000
  • Median monthly rent: $2,500
  • Average gas price: $1.874
  • Average cost of groceries: $39.06
  • Sales tax: 7%

Miami has the lowest median income on this list of worst cities for saving money, which means it’s harder for the city’s residents to afford the high cost of living there. On the plus side, though, Florida has no state income tax. And the 7 percent sales tax rate in Miami is the lowest among the worst cities for savers.

Photo credit: PHOTOSVIT/Shutterstock.com

7. Santa Ana, Calif.

  • Population: 334,909
  • Median income: $52,519
  • Unemployment rate: 5.4%
  • Median home listing price: $430,000
  • Median monthly rent: $2,598
  • Average gas price: $2.545
  • Average cost of groceries: $40.42
  • Sales tax: 8%

Forbes named Santa Ana one of the coolest cities in America in 2014 based on a ranking of entertainment and recreational amenities, diverse population and foodie culture. But that cool factor comes with a high cost. The median home list price and monthly rent — as well as average grocery and gas costs — are high, and the median income in Santa Ana is slightly below the national median, all of which can make it a tough place to save money.

Photo credit: iStock.com/Davel5957

6. New York, N.Y.

  • Population: 8,491,079
  • Median income: $52,737
  • Unemployment rate: 4.4%
  • Median home listing price: $699,000
  • Median monthly rent: $2,700
  • Average gas price: $1.984
  • Average cost of groceries: $46.17
  • Sales tax: 8.88%

Frank Sinatra was right when he sang the following line about living in New York: “If I can make it here, I can make it anywhere.” If you can manage to save money while living in this city with its exorbitantly high cost of living, then, yes, you can probably find a way to save in most other cities. Not only is it hard to save in New York because housing costs and daily expenses are high, but the median income is below the national median.

Photo credit: Atanas Bezov/Shutterstock.com

5. Anaheim, Calif.

  • Population: 346,997
  • Median income: $59,707
  • Unemployment rate: 5.4%
  • Median home listing price: $535,000
  • Median monthly rent: $2,500
  • Average gas price: $2.545
  • Average cost of groceries: $47.72
  • Sales tax: 8%

Anaheim is home to Disneyland Resort, which is great for visiting, but the city might not be the best place to call home if you want to save money. This city near Los Angeles rivals its bigger neighbor when it comes to a high cost of living. But a higher median income and lower housing costs keep Anaheim from being ranked as high as LA on this list of worst places to live if you’re trying to save money.

Photo credit: Juan Camilo Bernal/Shutterstock.com

4. Irvine, Calif.

  • Population: 248,531
  • Median income: $91,999
  • Unemployment rate: 5.4%
  • Median home listing price: $847,922
  • Median monthly rent: $3,400
  • Average gas price: $2.545
  • Average cost of groceries: $44.67
  • Sales tax: 8%

Irvine is an affluent city in Southern California that has the highest median income of the 15 worst places for saving money. The city has been included in several "best places to live" lists in recent years because of its strong economy, well-regarded schools, and, as a planned community, thousands of acres of green space. But high home listing prices, rent, and daily expenses such as gas and groceries can take a big bite out of the big salaries in Irvine, leaving little money to save.

Photo credit: iStock.com/Davel5957

3. Oakland, Calif.

  • Population: 413,775
  • Median income: $52,962
  • Unemployment rate: 3.9%
  • Median home listing price: $480,000
  • Median monthly rent: $4,650
  • Average gas price: $2.373
  • Average cost of groceries: $53.43
  • Sales tax: 9.5%

For years, Oakland has been considered the cheaper alternative to San Francisco. However, it’s by no means a cheap place to live relative to other cities in the U.S. In fact, rent prices in Oakland increased more in 2015 than any other major city — including San Francisco — according to the 2015 Zumper National Rent Report. Considering the median income here is lower than the national median, residents have little left over to stash into savings after covering high housing costs and daily expenses.

Photo credit: iStock.com/Davel5957

2. Los Angeles

  • Population: 3,928,864
  • Median income: $49,682
  • Unemployment rate: 5.4%
  • Median home listing price: $650,000
  • Median monthly rent: $3,950
  • Average gas price: $2.567
  • Average cost of groceries: $39.01
  • Sales tax: 9%

For the second year in a row, California’s largest city lands in the second spot on GOBankingRates' list of worst places to live for saving money. LA is considered the worst major city for housing affordability, according to a report by Southern California Public Radio. Although places such as San Francisco have higher rents and home listing prices, median income in Los Angeles is lower, making it harder to cover the high cost of living and leaving little room in household budgets to save.

Photo credit: iStock.com/Sean Pavone

1. San Francisco

  • Population: 852,469
  • Median income: $78,378
  • Unemployment rate: 3.9%
  • Median home listing price: $998,000
  • Median monthly rent: $4,650
  • Average gas price: $2.516
  • Average cost of groceries: $58.76
  • Sales tax: 8.75%

San Francisco retains its No.1 spot on this list of worst places to live if you’re trying to save money. Known for being one of the most expensive areas in the U.S., the City by the Bay has the highest median home listing price, highest median rent and highest average cost of groceries on this list. With such high housing costs and daily expenses, a median income of $78,378 doesn’t go far in San Francisco.

Photo credit: iStock.com/Lenin RzSz

of
SEE ALL
BACK TO SLIDE
SHOW CAPTION +
HIDE CAPTION


4. Being Vague with Your Savings Goal

It's easier to lose the motivation to save if you don't set clear and specific savings goals for yourself. Pink advised using the five W's and an H to help: "What is the goal, who's going to contribute, where are you going to stash the cash, when is this goal due and how much do you need to accomplish it?"

5. Letting Debt Stop You

Paying off debt may not seem like a way to save, but it can be. "Debt reduces your ability to save, but only temporarily," Pink said. The sooner you pay off any outstanding debts, the less you're going to pay in interest and can save over time. (You can read this guide for tips on how to get out of debt.)

While it's important to set money aside, there are also financial benefits to paying down your debt, like improving your credit score. You run the risk of damaging your credit if you are in too much debt and can't keep up with payments. To see how your debts and spending habits are affecting you, you can view your free credit report summary, updated each month, on Credit.com.

More from Credit.com
The best secured credit cards in America
The best balance transfer credit cards in America
Statute of limitations on debt collection by state

This article originally appeared on Credit.com.

Read Full Story

People are Reading