Making Financial Miscues Early on in Life Could Have Potentially Drastic Consequences!
1) Excessive spending is one of the biggest financial mistakes worth noting and avoiding.
One of the most unappreciated attributes of someone who has money is their ability to control how they spend it. Americans have a tendency to overspend, consume heavily, and fail to save their money. In fact, 60% of Americans do not have one month’s income saved up. This issue can be attributed to a few different things but mainly it’s the lack of education geared toward investing and saving.
A crucial financial plan to implement immediately is developing a budget. Having an allotted amount of money set aside each month for certain categories such as bills, entertainment, gas and food will greatly help you reduce your spending. If your entertainment envelope runs out by the 25th, don’t borrow money from the gas envelope. You’ll start to develop unbreakable self-control. To stay committed, make sure a close family member or friend is aware of your plan and have them hold you accountable so you are able to stick to your goal.
2) When you’ve made a commitment to clean up your financial act, remember this … discounted does not mean free or even a good idea!
Too often, people will spy a deal while window-shopping in their local mall and feel the pressing desire to act on it. Just because that pair of $2,000 Italian shoes is 25% off does not mean you need to whip out the credit card and drop $1,500 on the spot just because it’s a ‘good deal.’ If you find something that you can’t live without, a smart plan would be to put aside money from every paycheck until you have enough to afford it. This is called budgeting, as we spoke about earlier. The way most retail stores market is by displaying both the original price and the discounted price to show the customer how crazy it would be for them to pass up on the newly priced merchandise!
3) Acquiring even more debt will not help you reach your financial goals. Stop now and focus on saving, not buying!
According to www.economy.com, the average American owes just over $78,000 in debt. Granted, the majority of this debt comes from a mortgage but many are still battling credit card and student loan debt. In fact, Americans owe $875 billion in student loans and $972 billion in credit card debt. The average American owes $23,000+ for student loans and $8,300+ for credit cards. The only debt that is acceptable, according to financial advisor and best-selling author Dave Ramsey, is a mortgage. Owing money is something that will hold you down and produce stress and anxiety. Start now by conscientiously removing all debt!
4) Paying only the minimums on your credit cards or other debt will only help seal your financial demise
If you pay only the minimums on your credit cards or other debt, a large portion of what you pay will just go directly to interest. It will take you forever to pay down principle and you may be paying for years on a small purchase made today. Always pay more than you have to!
5) Not putting money in savings immediately and regularly is a huge financial error!
People always say “I can’t afford to put money in savings.” My response is always ‘you can’t afford NOT to’. Too many people think that things will be easier for them to save in the future, and this unfortunately is not a logical thought. A wise choice would be to put 10% of every paycheck into a savings account that doesn’t get tapped into for any non-emergency related occurrences. No excuses. A smart thing to do with your money is invest it in something that appreciates in value even if it’s a small amount each month dumped into a CD or Life Insurance Policy. Regardless of anything else you do, start saving immediately.
6) Cashing in the 401k … good idea? Or BAD?
Now this advice is for the people still paying into their 401k. Not only are you forced to pay taxes on your 401k when you cash it in, but not letting it develop compound interest over time is an excruciating shot to your financial future. Your retirement relies greatly upon the 401k being intact and when you cash it in, you officially remove your foundation for retirement. Let’s hope you don’t rifle through it in 5 years and then be forced to re-enter the work force in your 70’s. That would be heart-breaking. Learn your lesson by reading this now: do not cash it in!
7) Buying a brand new car … Does this make good financial sense or are you shooting yourself in the foot?
The typical brand new car drops down in value about $17,000 over its first two years according to financial guru Dave Ramsey. This, my friends, is a depreciating asset if I’ve ever seen one. You can buy a car that is two years old and still be able to enjoy high quality PLUS tremendous savings. Is the car going to be in poor condition after just 2 years? Absolutely not! You’ll be hard-pressed to find a millionaire who says that purchasing a brand new car is a smart choice. Worst yet is that people often trade their car in after 2-3 years and lose money on it.
Remember, success is a choice! Remember – it’s not always easy to change but trust your gut.