Here we will see some of the most common financial mistakes that often direct people to the main economic difficulties. Even if you have faced financial difficulties, avoiding mistakes -this mistake can be the key to survival.
- Excessive and reckless expenditure
Big fate is often lost one dollar at a time. This may not look like a big problem when you take a double cappuccino mocha or dinner or order a movie pay per show, but every small item increases.
Only $ 25 per week is spent on food outside the cost of $ 1,300 per year, which can be used for additional credit cards or car payments or some additional payments. If you experience financial difficulties, avoiding this mistake is really important – however, if you are only a few dollars from confiscation or bankruptcy, each dollar will count more than before.
- Payment that never ends
Ask yourself if you really need items that make you pay every month, year after year. Things like cable television, music services, or high-class gym membership can force you to pay nonstop but make you have nothing. When the money is tight, or you just want to save more, creating a slimmer lifestyle can be very helpful to fatten your savings and save yourself from financial difficulties.
3. Live with the borrowed money
Using a credit card to buy important things to be somewhat ordinary. But even if the number of consumers who continue to increase are willing to pay two digit interest rates with gasoline, food, and a number of other lost items long before the bill is paid in full, not wise financial advice to do it. Credit card interest rates make the price of goods charged much more expensive. In some cases, using credit can also mean you will spend more than you produce.
4. Buy a new car
Millions of new cars are sold every year, although some buyers are able to pay it in cash. However, the inability to pay cash for a new car can also mean the inability to buy a car. After all, being able to pay payments is not the same as being able to buy a car.
In addition, by borrowing money to buy a car, consumers pay interest on depreciation assets, which strengthen the difference between the value of the car and the price paid for it. Even worse, many people trade in their cars every two or three years and lose money for every trade.
Sometimes someone has no choice but to take loans to buy a car, but how many consumers really need a big SUV? Vehicles like that are expensive to buy, insured, and fuel. Unless you pull a boat or trailer or need an SUV to make a living, it’s not profitable to buy it.
If you need to buy a car and/or borrow money to do it, consider buying that uses less gas and less costs to ensure and maintain. The car is expensive, and if you buy more cars than you need, you might burn money that can be saved or used to pay off debts.
- Spend too much to your home
When it comes to buying a house, bigger is not always better. Unless you have a large family, choosing a 6,000 square feet will only mean more expensive tax, maintenance, and utility. Do you really want to place large and long-term dents in your monthly budget?
6. Using home equity like a piggy bank
Funding and taking cash from your home means giving ownership to others. In some cases, refinancing might make sense if you can reduce your tariff or if you can pay back and pay off a higher debt.
However, another alternative is to open a home equity credit line (Heloc). This allows you to effectively use equity in your home like a credit card. This can mean paying unnecessary interest in order to use your home equity credit path.1
- Paycheck lives to Paycheck
In June 2021, the Level of Personal Savings for the U.S. is 9.4%.2 Many households can live with salary to salary, and unexpected problems can easily be disaster if you are not ready.
The cumulative results of excess expenditure place people in a precarious position – where they need every penger that they produce and one missed salary will be a disaster. This is not a position you want to find when economic recession struck. If this happens, you will have very few options.
Many financial planners will tell you to save spending for three months in an account where you can access it quickly. Losing a job or change in the economy can drain your savings and place you in the debt cycle to pay debts. A three -month buffer can be a difference between maintaining or losing your home.
- No investment in retirement
If you don’t get your money to work for you in the market or through other income -producing investments, you might never be able to stop working. Making a monthly contribution to a designated retirement account is very important for a comfortable retirement.
Take advantage of a retirement account deferred by taxes and/or plans sponsored by your employer. Understand when your investment must grow and how many risks you can tolerate. Consult with financial advisors who meet the requirements to match this with your aim if possible.
- Pay off debts with savings
You might think that if your debt costs 19% and your retirement account produces 7%, exchange of pensions for debt means you will pocket the difference. But that is not that simple.
In addition to losing the power of compounding, it is very difficult to pay back the pension fund, and you can be beaten at a large cost. With the correct mindset, borrowing from your retirement account can be a decent choice, but even the most disciplined planner has a difficult time to put aside money to rebuild these accounts.
When debt is paid, the urgency to pay it usually disappears. It would be very tempting to continue to spend at the same speed, which means you can return to debt again. If you are going to pay off debts with savings, you must live like you still have a debt to be paid – to your pension fund.
- Has no plan
Your financial future depends on what is happening right now. People spend hours watching TV or tracing their social media bait, but set aside two hours a week for their finances is out of the question. You need to know where you were going. Make time spend time planning your finances as a priority.
Underline
To keep away from the dangers of excessive expenditure, start by monitoring small costs that increase quickly, then turn to monitoring large costs. Think carefully before adding new debt to your payment list, and keep in mind that you can make payments are not the same as being able to pay purchases. Finally, to save some of what you produce monthly priorities, along with spending time developing a good financial plan.
