Not Preparing for Emergencies
An emergency fund is important for anyone. A signing bonus—whether you’re a pro athlete or a non-athlete receiving a one-time bonus for meeting goals at work—can help give a big boost to an emergency fund. Aim to have one year’s salary in savings for emergencies, such as losing your job.
Saving and Investing Early
Having large paycheck for 10 years or so can lead to forgetting about saving and investing for the long-term. If you’re a high earner, regularly getting significant checks can make you think the good times will last forever and that you don’t need to save for retirement.
Living paycheck-to-paycheck can also be difficult and push you into putting off saving or investing for retirement. Try not to let that stop you from contributing to a 401(k) retirement plan at work, especially if your employer matches your contribution. It’s turning away free money.
Too Many Hangers-On
Chances are you don’t pay for your friends and family every time the bill shows up, but you may be paying people in small ways that can add up. Do you loan money out without ever expecting to be repaid? Do you charge a few rounds of drinks after work, only to forget it until your credit card statement arrives? Your generosity could be costing you, especially if you can’t afford it. Cut back such spending and put that money in a savings account instead.
Any financial mistakes could be devastating if you don’t get them under control.