In this day and age, there really shouldn’t be any reason to make certain financial mistakes. Especially if you are in a challenging financial situation, steering clear of these mistakes could be the key to survival.
Here are some of the most common mistakes that I’ve seen people make.
Mistake #1: Using that little plastic card to get what you want
This is the number one mistake people make or shall I say probably the most common mistake today. I guess most of the people today might be having a credit card. It is almost like a right of passage when you turn eighteen.
Credit card debt is the fastest way to ruin your finances. It is easy to acquire but difficult to pay off.
Even the minimum balance option does not help much. When you exercise the minimum payment on your credit card, you’re giving yourself temporary relief. But you’re also committing to paying more in interest charges later. Also, paying off your credit card will take much longer.
And if you miss the minimum payment, then late payment could be charged as well.
Mistake #2: Buying more home than you can afford
With the real estate market situation today, many people are regretting their housing decisions. Some people might find the banking requirements to get a mortgage today more tighter than they were before.
Some people might find the mortgage, interest rate, adjustable rate, etc too confusing. Too many people only consider the introductory rate. They stretch and purchase as much as they can afford. Then, when the rates go higher, they can’t afford the payment. Not to forget the slowing housing market, and you may have a foreclosure on your hands.
If you are going to buy a home, make sure that you purchase what you can afford. Take out a fixed-rate mortgage so that you know what your payments will be. If rates go drastically down in the next couple of years, you can always refinance. If rates go up, you are protected. Try to aim for a 15-year mortgage over a 30-year. It will save you hundreds of thousands in interest. But if you can’t do it, a 30-year fixed-rate mortgage is an acceptable loan choice for the purchase of a home (year time frame may vary from country to country and banks as well).
Some important point to consider and ask yourself:
1)Do you really need a bigger place? If yes, what are the reasons to support your decision.
2)How would it matter if you don’t buy a bigger place?
3)What is it that you can afford considering your current financial situation?
4)How prepared are you for this?
5)What if you don’t have your job or business tomorrow, how do you plan to pay off the loan?
Mistake #3: Not controlling your money
Too many people live paycheck to paycheck. They have no savings. They have no retirement plan. They have nothing to back them in case of an emergency. They have no control over their money.
It’s important that you get into budgeting, saving, investing and taking care of your expenses early on. You have to take control of your finances before it takes control of you. It’s important if you want to retire someday. All it takes is planning, time and patience. And once you get this going, you will notice that you have more control over your life and finances. You should be able to speak where your money goes, not lenders or creditors or anyone else.
Mistake #4: Not saving for retirement
There are more seniors in the work place now than there were twenty years ago. And even more than there were fifty years ago. If you want to retire with enough money to live comfortably, you have to start putting something back today.
Start with a pension fund or fund/contribution that is available in your country as per government rules. Figure out how much you need to invest in order to get a pension that you would like to have after your retirement and find a way to do it. This is your future.
You don’t want to reach sixty and realize that you can’t afford to stop working. There is no guarantee that your social security or other forms of assistance are enough. What if you fall sick and have to retire? What if you run into some physical disabilities? Prepare for the future. Start saving for retirement today.
The above are some financial mistakes that you should know and consider. Avoid making decisions that you might regret later. You might have probably made some yourself and realised it’s importance later on.