Five Of The Most Common Financial Mistakes Most People Make
Personal finance management is tough for many people. Financial education is non-existent in most high schools and many parents lack sound financial skills to pass on. Here are five financial mistakes most people make.
Failure to Budget
Failure to budget is one of the most common and most devastating financial mistakes a person, or family, can make. It’s the equivalent of closing your eyes, putting your fingers in your ears, and humming. A budget forces you to confront your financial reality and live within your means. Budgets also allow you to save money and make informed decisions about the level of debt you can handle.
Financing with Debt
You want a new TV or to take a trip. Rather than saving up to finance the purchase out of pocket, it goes on a credit card. Perhaps you need a better car. You go to the car dealership, pick a car and negotiate the price. Then you enter into a financing agreement. Financing with debt always costs more, thanks to interest, but advance saving lets you limit the debt by putting together a full or partial payment together ahead of time.
Failure to Pay Taxes
Every year, you fill out the paperwork and file the tax forms. What you neglect to do is send the government a check. Abakhan & Associates Inc., a firm that helps people with bankruptcy in Surrey, notes that this is an especially poor decision, as it constitutes a crime. Tax collection ranges from benign, a letter, to catastrophic, such as a having your property seized.
Unnecessary Spending
A look at most debit and credit card statements will expose a lot of unnecessary spending, ranging from daily coffee at a Starbucks to impulse purchases at a retail outlet. Individually, most unnecessary spending looks harmless, but takes a serious cumulative toll. Cutting out unnecessary spending, or instituting a fixed allowance for splurges, positions you to build breathing room into your finances.
Unused Services
People sign up for services with the expectation that they’ll make use of it. Yet, frequently, they don’t. Gyms make more on memberships from people who don’t use the facilities than people who do. How much value are you getting from those three streaming video services? Cutting out services you don’t use is a fast step to limit your financial blood loss.
Passing Up Tax Breaks
People often look only at the return an instrument gives them causing them to overlook how they effect their returns. Those that didn’t manage their investments gave up one to two percent of their annual tax returns. Make sure you always look at the investments that are taxable, tax deferred, or tax-free.
Paying Late Fees
Even if you are keeping up with your bills, paying late fees can impact your credit score negatively. To avoid this from happening don’t have your due dates scattered through out the month, align them so all your due dates are the same. The best day to pay all your bills is on your payday, then you are guaranteed to have enough money in the bank. Also, if possible, sign up for automatic withdrawal so you never miss a payment again.
Not Checking Your Credit Score
You should be checking your credit score three times a year or you may be leaving charges undetected. This will help you also detect problems before they get too out of hand such as a stolen credit card. To get your credit report request a free report online from either Equifax, Experian, Transunion. They are required to provide you free reports once a year. Make sure you flag unexpected changes to your report and report any problems you find to a credit agencies.
Financial mistakes are easy to make. They aren’t always easy to rectify. By avoiding or stopping the five mistakes above, you can make your financial life easier.
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Category: Budget, Financial Education
