No-one is exempt from making financial mistakes. Even millionaires can end up back at square one, with bankruptcy knocking at their door more than once. However, financial slipups are more likely to happen to those who don’t have the correct tools or information at their disposal to avoid them. Here are a few common financial mistakes, and what you can do to sidestep them.
Making a Deal with the Devil
While you’re not making a deal with the literal devil, relying on a traditional loan shark for financial assistance is close enough. Without the right information, you can end up with sky-rocketing interest rates and debts you have little hope of ever repaying.
Instead of using a payday lender or loan shark, consider one of the many reputable payday loan alternatives instead. There are many businesses out there who can offer fast online loans with transparent terms and affordable repayment criteria.
Signing Up for Hire Purchase Agreements
If you’ve always wanted a flash TV or luxurious leather lounge suite, then a hire purchase agreement can make it seem like it’s within reach. The truth is, it may not be. Such contracts can come with high-interest rates, costly documentation fees, and fine print that’s not in your favor. If, for example, you run into financial strife, the company with which you signed the agreement could uplift your item.
What’s more, if someone steals the item, or it’s lost or destroyed, your insurance may not cover the replacement value because you haven’t finished paying for it. If you need to make a significant purchase, place that same weekly sum away each week until you have enough. You can then pay cash and own that fancy new TV all on your own.
Relying on Your Credit Card
Nearly one in five people are reliant on their credit card for living expenses, and almost half of Americans have maxed theirs out. These are worrying statistics, considering it’s a line of credit rather than your money.
The average credit card interest rate is from 17% to 25%, which means you are paying up to 25% more for goods than what they are worth. For example, if you used your credit card to purchase $200 worth of groceries, you are paying $250 for them. It’s time to set a budget. Live within your means, pay down your debts, and use your own money rather than your bank’s.
Not Saving Your Money
According to Federal Reserve data, the personal savings rate for the average United States household in 2018 was a little over 3%. Most families are living paycheck to paycheck, with no inclination or option to save for an emergency or future purchase. Get tough on yourself. See a budget advisor, know where your money is going, and set aside a percentage each week into an account you can’t touch.
Not Having a Financial Plan
Where do you see yourself in ten years? Do you have a plan for yourself, your future, and your finances? A common mistake that people make is forgoing a financial plan in favor of “living life in the moment.” Invest your money, save for a house deposit, or set up a savings account. You never know what the future will bring.
No-one’s perfect, and there will be times when you don’t make the best financial choices. However, that doesn’t mean you can’t turn your economic situation around. Make wise loan choices, see a budget advisor, and live within your means for the best chance of monetary success.