Top 8 Money Mistakes and How to Avoid Making Them
We will discuss ways to manage your money, as well as the basics of financial literacy and ways to limit debt. It is important to monitor your credit report so that you can help ensure all your personal information is correct and that the report accurately reflects your financial history.
- Excessive and Frivolous Spending
Great fortunes are often lost one dollar at a time. It may not seem like a big deal when you pick up that double-mocha cappuccino, but every little item adds up. Just $25 per week spent on dining out costs you $1,300 per year, which could go toward an extra credit card or auto payment.
- Never-ending Payments
Ask yourself if your monthly payments on certain items are necessary. Things like cable television, music services, or high-end gym memberships can force you to pay unceasingly, leaving you with 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.
- Living on Borrowed Money
Using credit cards to buy essentials has become somewhat commonplace. Even if an increasing number of consumers are willing to pay double-digit interest rates on gasoline, groceries, and a host of other items that are gone long before the bill is paid in full, it is not wise to do so because credit card interest rates make the price of the charged items a great deal more expensive.
- Buying a New Car
Millions of new cars are sold each year, although few buyers can afford to pay for them in cash. The inability to pay cash for a new car can also mean an inability to afford the car. Borrowing money to buy a car, can lead to the consumer paying interest on a depreciating asset, which amplifies the difference between the value of the car and the price paid for it.
- Spending Too Much on a Home
When it comes to buying a house, bigger is not necessarily better. Unless you have a large family, choosing a 3,000-square-foot home will only mean more expensive taxes, maintenance, and utilities. Do you really want to put such a significant, long-term dent in your monthly budget?
- Misusing Home Equity
Refinancing and taking cash out of your home means giving away ownership to someone else. In some cases, refinancing might make sense if you can lower your rate or if you can pay off higher-interest debt.
- Living Paycheck to Paycheck
The cumulative result of overspending puts people into a precarious position, one in which a single missed paycheck would be disastrous. This is not the position you want to find yourself in when an economic recession hits. If this happens, you will have very few options.
- Not Investing in Retirement
If you do not get your money working for you in the markets or through other income-producing investments, you may never be able to stop working. Making monthly contributions to designated retirement accounts is essential for a comfortable retirement.
To limit debt, save more money and become financially stable, it is always suggested to start a budget based on your needs and necessities. This can be done by spending money only when or where necessary or limiting your spending on things you can go without. You can keep track of your monthly expenses to see where your money goes and if there are items you can do without to save some extra money. For example, by switching from bottled drinks to homemade lemonade etc. can easily bring your monthly grocery bill from $600.00 down to $500.00.