Personal finance is a prickly topic people would often rather dodge not because of its difficulty to understand, but because most know that they are guilty of ignoring simple financial rules in favor of getting what they want NOW. Often we rationalize the “need” for our poor financial choices, even deluding ourselves into believing that its effects are not as harmful as financial advisers and well-meaning “nosey” relatives and friends would like to paint. Until we’re met with extreme financial difficulty, the everyday habits that we all know too well is contributing to our financial ruin seems easily surmountable.
Below are some of the most common financial mistakes people keep on repeating though already perfectly aware of the consequence. To make things less gloomy though, we’ve also given simple suggestions that might help you fight the bad habit.
1. Living beyond your means – Spending more than you’re making is THE single most common mistake and is something people from all walks of life are guilty of. It does not matter how much you make, because if you’re not careful you’ll still end up blowing all your hard-earned money. Aside from budgeting, which we all know is very hard to stick to, you can avoid spending all your money by setting up a savings/investment account that automatically transfers money to that account every payday. Save BEFORE your spend, because the other way just doesn’t work.
2. Abusing credit – Credit cards are great because they offer a convenient line of credit, but that truth is that they are ripe for abuse. It doesn’t matter whether it’s for business or personal reasons, if you don’t learn how to use credit to your advantage, you’ll end up with a debt crisis in your hand. One simple way to avoid abusing your credit cards is to stick with just one or two and to leave them at home whenever you go out. Make using them inconvenient for you so that you only end up tapping your line of credit when you absolutely need it!
3. Using loans to pay off loans – If your using loans to pay off loans, then you obviously already have a debt situation that’s fast getting out of hand. Using loans to pay off loans does not make sense because you’re ending up paying double on interest. The only time this becomes a wise move is when you get a really low interest loan with a more manageable payment scheme to pay off a high interest one. Instead of paying off your loans with another loan, go back to tip #1 and STOP LIVING BEYOND YOUR MEANS. This is the only way to stop this vicious cycle of borrowing.
Amy Fitzgerald is a professional blogger that provides financial advice and tips to consumers. She writes for TitleMax, a title loan company.
Photo Credit: Lesum