When it comes to managing your money, there are some financial decisions which can cause serious damages to your finances and your future.
1.) Not having a savings cushion. There will ALWAYS be some type of financial emergency, whether big or small. At least once a year if not more, something will happen which will cost you extra money – the roof will spring a leak, the car will need repairs, an illness will keep you out of work, the dishwasher will break, your teenager will run up the cell phone bill hundreds of dollars by accident, a loved one will get married and you’ll need to travel to the wedding, et cetera. You always need to have money set aside for emergencies.
2.) Living without a budget. You MUST know where your money is going and how much you spend every month. It is a natural human tendency to spend more than we think we are spending – unless we watch every penny. You can’t figure out where you are overspending without keeping a budget.
3.) Paying bills late. This ruins your credit rating.
4.) Spending to keep up appearances rather than spending what you can afford. When you buy a bigger house or fancier car, your expenses go up significantly. More insurance, higher utility bills, et. cetera. You need to set up a budget that allows you to pay your bills and set aside money for savings every month. Your rent or mortgage and your car payment and your clothing budget and your extras – vacation, entertainment, TV, etc. – need to fit within that budget.
5.) Ignoring financial reality when you start getting into trouble. The longer you put off facing your debts, the harder it is to get out of date. Late fees accrue. Interest rates shoot up, making monthly payments higher. Your credit score plumments. If things get bad enough your vehicle can be repossessed and creditors may pursue legal judgements against you. As soon as you realize that you can’t pay off all of your bills every month you need to contact your creditors and work out a payment arrangement which could include lower monthly payments.
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