Finance Fails – 4 Common Money Mistakes And What You Can Do To Fix Them
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Living paycheck to paycheck is an unfortunate reality for some. The untold truth is that it happens to earners at all income levels. Just because a person owns numerous high-ticket items doesn’t mean they have all their affairs in order. It also doesn’t mean they aren’t cash-poor the day before payday. Here are five common financial mistakes and what you can do to fix them:
1. Missing The Fine Print Of Your Loan Conditions
Many people will need to borrow money at least once. The mistake is letting the urgency cloud your judgment of the terms you end up agreeing to. While credit cards and payday lenders appear to be the fast and easy option, their high-interest rates and variable conditions leave many in debt cycles that end up costing much more.
Borrowing from a close relative or friend that you trust is the ideal loan condition. When that isn’t possible, low-interest money loans from community-focused providers are a safer alternative. These are usually smaller loans designed to help people in their time of need by covering the cost of medical expenses, education or a second-hand vehicle. You should never feel embarrassed to ask for help when you are stuck in a difficult financial situation.
2. Forgetting About Subscriptions and Ongoing Expenses
More and more popular services are turning to subscription-based payment models. While this can be convenient for those who cannot afford heftier upfront costs, the biggest beneficiary in these situations is always the business. The reason is simple: direct-debit and auto-payment options mean that steady cash flow will be coming in from active subscribers as well as one-off users who forget to cancel the service.
You can easily prevent this by looking through your bank transaction every month to spot any unwanted ongoing costs before they accrue. And remember to always mark cancellation dates for free trials on your calendar.
3. Not Having Emergency Savings
Leading a comfortable lifestyle is not determined solely by the numbers in your bank account. If you cannot come up with $2,000 in an emergency situation, you are putting you and your family’s wellbeing at unnecessary risk. Your emergency fund should be completely separate from your daily checking account and any goal savings accounts and only used in serious circumstances like after a job loss or unforeseen medical or travel expenses.
Start by putting aside a percentage of your income before you pay any bills or go shopping. Eventually, you’ll want to save up about three months’ worth of your living expenses. This way, if you do fall into a difficult situation, you can concentrate your attention on getting out of it, rather than coming up with rent money.
4. Buying A New Car You Can’t Afford
Many people cannot imagine their life without a car. While a reliable vehicle can play a big role in your job responsibilities, or even finding work, owning a flashy, brand new car is almost-never a necessity. Not only does buying new cost a small fortune in upfront payments but the resale value diminishes exponentially and you may be more susceptible to defects. The car manufacturer will be looking out for customer feedback on how to improve its newest models in the first couple of years. To be on the safe side, go for a reputable car brand that has been on the market for at least three years.
While you cannot control every aspect of your financial life, following the above points can help you avoid falling into these common yet serious money mistakes.
