We all make financial mistakes now and then and that’s how we grow. Getting a fresh paycheck and being broke by the end of the month are the days we all have seen but here are some common financial mistakes that you should avoid for a better future.
Excessive Spending
Well, this doesn’t need an explanation but every little item matters. If you’re enduring financial hardship, avoiding this mistake really matters—after all, if you’re only a few dollars away from foreclosure or bankruptcy, every dollar will count more than ever.
Never-Ending Payments
Things like cable television, music services, or high-end gym memberships can force you to pay unceasingly but leave you owning nothing. When money is tight, or you just want to save more, creating a leaner lifestyle can go a long way to fattening your savings and cushioning yourself from financial hardship.
Borrowed Money
Using credit cards to buy essentials has become somewhat commonplace. Credit card interest rates make the price of the charged items a great deal more expensive. In some cases, using credit can also mean you’ll spend more than you earn.
New Car
Borrowing money to buy a car, the consumer pays interest on a depreciating asset, which amplifies the difference between the value of the car and the price paid for it. After all, being able to afford the payment is not the same as being able to afford the car.
Spending Too Much on House
It’s your home and obviously, you’ll spend money on it but refinancing and taking cash out of your home means giving away ownership to someone else. However, the other alternative is to open a home equity line of credit (HELOC). This allows you to effectively use the equity in your home like a credit card. This could mean paying unnecessary interest for the sake of using your home equity line of credit.
Paycheck to Paycheck
For some, it’s the only source of income but this is not how it should be – Invest! Many financial planners will tell you to keep three months’ worth of expenses in an account where you can access it quickly. Loss of employment or changes in the economy could drain your savings and place you in a cycle of debt paying for debt.
Not Having a Plan
Your financial future depends on what is going on right now. People spend countless hours watching TV or scrolling through their social media feeds, but setting aside two hours a week for their finances is out of the question. You need to know where you are going. Make spending some time planning your finances a priority.
In the end, just always ask yourself ‘Do I really need it?’ before making any avoidable purchase for a better future.
