6 Scary Money Mistakes and How to Avoid Becoming a Financial Horror Story
Managing money may seem stressful at times. Unexpected expenses, changes in employment, and changes in family or lifestyle may all lead to money issues. Making sure you have money saved up for the unexpected is crucial. Here are some other scary money mistakes that you may want to avoid.
1. Keeping a Balance on Your Credit Card
Credit cards are necessary for building a healthy credit score, but they may quickly damage your financial health if you aren't careful. Credit cards may be used for convenience since paying by cash and check is becoming less and less common. However, spending more than you are able to afford paying off each month might quickly derail your financial plans and cost you a significant amount in interest.1
2. Paying Your Bills Late
One of the quickest ways to damage your credit score and limit your borrowing power is by paying bills late. Payment history is one of the most significant factors in your credit score; even missing one or two payments may cause a score drop. On top of the hit to your credit score, you may also have to pay late fees or additional interest if you don't pay your bills on time.2
3. Waiting Too Long To Save for Retirement
Everyone hopes to have an enjoyable retirement after years of hard work. Unfortunately, you may be under financial strain with rising costs if you don't save early. Saving for retirement early may help you to grow your money faster and better prepare for a more comfortable retirement.1
4. Buying Things You Are Unable To Afford
Large purchases are a part of life, such as buying a car, a house, or even a boat. While it is important to enjoy your money by spending it on the things you want, it is crucial only to buy what you are able to afford comfortably. Before you decide to buy something, consider the payments required for any large purchase, the interest expense, and the associated costs of maintaining what you buy.2
5. Not Prioritizing Debt Repayment
Staying on top of your debt is critical. Failing to plan to pay it off may result in financial struggles down the road. Whether your debt includes student loans, personal loans, or credit card debt, you want to set aside enough money each month to pay the debt down. This helps manage the interest you pay and strengthen your debt-to-income ratio.2
6. Not Having Enough in Your Emergency Fund
Emergency funds are essential to take care of unexpected expenses and provide needed funds if your money source or income suddenly changes. A good rule of thumb is to put three to six months of income away to take care of emergencies. Always remember to replace the funds if you need to use them.1
Important Disclosures:
Content in this material is for educational and general information only and not intended to provide specific advice or recommendations for any individual.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by WriterAccess.
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Footnotes
1A Halloween Story: The 5 Scariest Money Mistakes
https://www.forbes.com/sites/advisor/2019/10/30/a-halloween-story-the-5-scariest-money-mistakes/?sh=531151d75fb4
25 Money Mistakes That Could Cost You a Fortune
https://www.yahoo.com/now/5-money-mistakes-could-cost-113000360.html
