Financial mistakes are easy to make; in fact, sometimes you aren’t even aware that you are making them. Therein lies the difficulty, avoiding financial mistakes can be a challenge if you are not aware of them.
All mistakes can be corrected though, whether the mistakes are made from too much debt, too many fees, loans,late pays or from abusing your credit. Let’s explore some successful methods other people just like you have used to avoid their financial mistakes.
Financial Mistakes Others Have Avoided:
Drowning in Debt While Investing
- Drowning in debt while struggling to invest is the financial mistake made most often.
- You are told over and over again to invest at all costs…worry about debt management later.
- Your employer preaches to you to invest in your 401k plan, your friends are all telling you to invest, ads on tv and in the newspapers tell you to invest to the death. But, stop and think about it, if you earn less on your investments than you pay out on the interest charges on your debts, the math does not add up.
- For example, if you are earning 5% on your investments, but paying 21% in credit card interest – you are in the negative, you’re not moving forward, you are going backwards. You may think about putting your investment contributions on hold until you pay off your debt.
- Before investing, maybe look into some debt management first.
Avoid The Expense of Paying Unnecessary Fees
- Over Draft Fees: The way others have avoided the mistake of paying unnecessary fees from financial institutions is by keeping enough money in your accounts so as to not be over drawn. And the way you do that is by living within your means.
- Buy to meet your needs, not your wants. Do not let your household expenses become greater than your household income. Consider going on a budget.
- Credit Card Late Fees: Credit card late fees can get so expensive. Avoid them at all costs. Do not charge up on your credit cards more than you can pay off each month.
- Although cutting back on your expenses may sound impossible, it is not that difficult if you do it a little at a time. Do not go cold turkey but ease into it.
- By paying credit card late fees you simply increase the cost of everything you buy.
The Damage Caused by Paying Late
- Making your mortgage payments, car payments or credit card payments late stressful and loaded with risk. The stress is a result of the risk that you could lose your house or have your car repossessed.
- Due to your late pay habit your creditors may require you to make larger down payments and larger minimum balance payments. Starting the bad habit of paying late leads to lots of inconveniences.
- Paying late is expensive because of all the extra fees that are tacked on; and the higher interest rates you pay by being a late payer.
- Work with your lenders to negotiate some type of adjusted payment plans. In today’s economic environment most lenders would rather work on adjusting your payments than not receive any payment at all.
Credit Score Abuse
- You abuse your credit scores by not doing everything you possibly can to keep them above 750.
- Not taking care of your credit scores is a big financial mistake.
- Your credit scores are invaluable because they affect your financial life in ways you cannot believe.
- Employers, landlords, mortgage lenders, credit reporting agencies and leasing companies are just a few of the financial entities that evaluate your credit scores before working with you. And if some of them do work with you, you will be charged more if you do not have good credit scores.
- Credit scores above 750 are considered by the industry to be good credit scores, so strive to get your credit score above 750 and keep it there.
- Credit scores below 750 are bad credit scores and will cost you more on everything you buy.
- One very important financial mistake others try to avoid because of the long-term impact is taking loans against retirement accounts.
- Borrowing from a 401k account or IRA account to pay for today’s expenses is taboo and should be avoided at all costs.
- Remember why you started your retirement investments.
- Remember why you make contributions to your retirement accounts – you have earmarked that money for your future so find other ways to pay for today’s expenses, do not tap into tomorrow’s investments.
- You are better off to stop your 401k plan or IRA contributions than to take out a loan against those retirement investment accounts.
Financial mistakes do happen, but they can be avoided. Changing your financial habits can help reduce or eliminate your financial mistakes. Changing your habits is sometimes difficult, but in the long run, well worth your effort. If you make some financial mistakes, that’s okay, just work on changing your habits to help avoid making the same mistakes