As humans, we all make mistakes, particularly financial mistakes. The reason we make financial mistakes is that we aren’t following a plan and exercising self-control. We base our buying decisions on how we pay attention to and manage our money—choosing between making coffee and buying one at the local coffee shop or between wearing an old outfit from our closet and buying a new one for a party. You are not alone making mistakes with your money; here are 5 deadly financial mistakes everyone makes or thinks about making.
Living Paycheck to Paycheck
Living paycheck to paycheck means that you have no room to breathe with your finances every month. All of your money goes into your account, and then it all goes out. You have no extra money to save for emergencies, to put in your 401K, or spend on other things. With no money to spare, having a financial crisis could make your already bad financial situation worse.
Sometimes living paycheck to paycheck is due to circumstances out of your control, such as a newly, single mom trying to work, pay for daycare, and bills. For most people, a little self-control and clean up of their budget will alleviate this issue. If you are living paycheck to paycheck and paying $150 a month for cable, you need to rethink your spending.
Cosigning a Loan
When you consign a loan for someone, you trust that they will be responsible and make their loan payment monthly and on time. You probably did this because you are trying to be helpful. For the most part, you are cosigning because the person has no credit or their credit is bad due to poor money management in the past. When you cosign, the responsibility of making the payments is now out of your control. If the person you helped suddenly has no money or decides they want to be financially irresponsible, then it falls on you. What could be worse than having an extra $15,000 in debt for a car that you don’t even get to drive?
Not Having Health Insurance
A study done by Academic Researchers determined that 66.5 percent of all bankruptcies were due to medical bills. You have probably had a time or two when you risked living without health insurance. Is not having health insurance worth the risk? You live each day not knowing what will happen to you or a member of your family. Not only could you end up in the hospital with an unexpected illness and surgeries to deal with, but you are also now dealing with possibly hundreds of thousands of dollars in medical bills coming your way. If you think your financial situation is stressful enough, paying full medical bills out of pocket will ruin your finances. Find a way to get health insurance, and if your employer offers it bite the bullet and take the paycheck deduction. It is not worth the risk.
Buying More House Than You Can Afford
Whether you are buying your first home or your third, it is an exciting venture. But too easily we get sucked into the process and get ourselves into a financial mess. When you buy a home that costs more than you can afford, it is easy to justify. But after making a few monthly payments, you realize that a large percentage of your monthly income is paying towards the house. Having a large house bill will make you live as if you only work to make your house payment. A home should be an asset, not a burden.
Not Keeping Track of Your Money
Businesses use payment processing software to keep track of their sales; you need to keep track of your finances with a budget. Not keeping track of your money can cause you to get into a bad financial situation. If you don’t keep track, then you are letting fate determine your future. One day you may wake up and realize that you have gotten nowhere on nothing. Don’t live to regret what you didn’t do to become financially stable.
The result of making mistakes is the learning opportunity. Take advantage of the learning opportunity to make a change for the better. If you keep trying, you will succeed.