Financial Sins That Will Put You Into Debt Faster Than Anything Else
The average American has thousands in credit card debt, a couple of car loans, and a home mortgage. These debts can easily reach into the hundreds of thousands. Credit is quite easy to get for those who have a decent history of making timely payments, but it is also easy to get in over one’s head by committing financial sins. Here are some such transgressions that will get you into debt quickly.
Buying A Brand New Car
The first thing that many new grads want to do after the ink dries on their diploma is get a new car. The big problem with this desire is the fact that they do not have adequate capital to pay cash for this new car. Buying a brand new car is a bad investment, and it will usually lead to debt and interest payments. A better move would be to buy a late model vehicle that’s already had some depreciation. This will cut down on the cost and interest payments while still providing a vehicle that should be reliable for several years.
Buying a New Car Too Often
Closely related, getting a new car every few years can be devastating to your finances as well. Because of depreciation, a new car will frequently be worth less than the loan that is outstanding on it beginning the minute it’s driven off the lot. This state of being upside down on a car will only grow for those who have to have the new car smell every three or four years. Keeping a car for a decade or more can be a great way to save money and avoid debt.
Getting an Adjustable Rate Mortgage
Introductory mortgage rates can be a big enticement to buy a house that’s outside a safe level. After the low rate readjusts to the market rate in three to five years, the monthly mortgage payment can go up hundreds of dollars each month. The remedy to this situation is getting a fixed-rate mortgage at a low rate that will not go up over the life of the loan.
Having Too Many Credit Card Payments
Paying less than the statement balance each month on a credit card is a sure-fire way to get into debt problems. What’s worse than paying off one credit card? Paying off multiple cards each month with the ability only to make the minimum payment. The more cards one holds leads to a bigger minimum payment. Watching credit card spending, especially on multiple cards, is an important step toward avoiding debt.
Not Doing Basic Budgeting
Most people know exactly how money goes into their bank account, but few know the exact number going out each month. While some costs will vary month-to-month, it is easy to make a budget and not a go a dime over it. People spend more than they intend to because of special deals they come across at the store, thinking the have more than they really do and believing that they need certain items. Make a budget and stick to it to stay out of debt.
Debt is a problem that should be avoided as much as possible. Getting into debt is the easy part. Paying it off is difficult. Talk to a financial expert to get you back on track for a successful financial future. Informational credit to D Thode & Associates.
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Category: Debt
