Currently, people spend money without thinking about the consequences. Why? Maybe it’s bad spending habits or other more serious addictive problems. However, the truth is that you can spend some money without getting into serious financial issues or even bankruptcy. Credit cards shouldn't be a problem. Financial mistakes are widespread, and we tell you how to find a way to improve on. Have an economic balance is easier than you thought!
Nevertheless, let’s run through the most common financial mistakes the average person makes and how to avoid them.
1. Improper use of credit cards. When you were growing up, a generally ultimate goal was having money, right? That's why you went to the bank and got your first credit card, very cool, no? A few months after that, you discovered that a credit card it isn´t so simple. You have to pay it every month because if you don’t do that, you run the risk of account closure and other serious issues that arise from delinquency.
Sometimes, things like the limit amount, the payment date, and interest rates are not part of the knowledge you have. When you have in your pocket a credit card, you must know how to use it. You should know that it isn't a tool or a magic wand. It is a useful system to use in emergency or specific payments.
2. Spending money like there's no tomorrow. Responsibility takes a considerable space in this theme. For example, if you can't afford Nike shoes, you shouldn't buy them. Why go into debt if it isn't a necessary expense? Saving money is a critical aspect of your daily life, don't you think? Make a list of all your payments to do. Save a space for one "special" or "fun" payment when you have some extra money.
The concept of a future is very essential for an individual. That's why organizing debts and setting up a financial structure is imperative. So, make a list of PRIORITIES.
3. Not setting priorities. Insurance. Emergency. Replace. Protection. Those are very strong and powerful words. When a person has had financial mistakes, the best thing that he or she can do is have adequate coverage in this insurance aspect:
- Apartment or house (homeowner or renter)
- Life –family
Any kind of priority depends on the person, but this is a few that you should consider as important. Which other priorities are necessary? Increase your incomes, of course.
4. Not saving. Do you want golden advice? Well, here you go: spend less than you earn, and do it for a long time. In this way, you are saving money. Actually, it is a straightforward rule, don´t you think? If you´re not saving, at least, some bills, you are not making progress financially.
Why is it important for saving money? You always should have a backup plan or a Plan B, if the Plan A doesn't work out. For example, if your car has a deflated rubber, you can take money out of your savings and repair it. Do you understand? Of course, you have to realize that being thrifty doesn´t mean be stingy or something like that.
The balance between spending and saving money is the key to improve your financial mistakes.
5. Compulsive buying. Usually, women are considerate as queens of "compulsive buying." About 6% of the U.S. population can be said to have compulsive buying behavior with 80% of compulsive buyers being women. However, this topic applies to every person, though.
How are your shopping habits? Are they good or bad? You can find out if you look at your wallet. Many financial mistakes are based on impulsivity an in a negative attitude.
You have to ask yourself if you have a positive or negative attitude with your payments. You should be more proactive with your finances, don´t you?
6. Unconscious decisions. A new sweater, a new pair of shoes, or the latest trend in technological gadgets could not be a priority. Food, medicines, electricity, water, and so on are necessary and irreplaceable payments. Actually, getting into debt is so easy, so be careful with this.
8. Accumulating debts. According to a recent study by the Federal Reserve Bank of Boston, 65% of credit card users are carrying debt, which means that most Americans are not worried about charging from month to month with debts and interest. This is kind of scary, right? Financial mistakes are usually based on this.
10. Living on Borrowed Money. Credit cards are not cash. They are not free money. Not having a plan to pay your debt is not right. So, what could you do in this case? The answer is very simple: get a banking advisor or a financial advisor.
They are qualified to provide you with some information to improve your financial mistakes.
9. Not setting budgets. A good financial strategy requires planning each movement in advance. Spend a couple of hours a week to establish your next expenses and the limit that you propose for each of them. Assign priorities to each payment to be made. Also, adapt to the current lifestyle is very meaningful and relevant.
If sitting down and physically writing budgets seems too difficult or tedious, make use of the many financial applications on your phone to do all the heavy lifting for you. Financialisto did all the work for you, listing the five best financial applications for you to use. Your wallet will thank you at a later time!
10. Not investing. Real estate, stocks and even cryptocurrency could be several options to invest your money. However, if you are in delicate financial situation, investing large sums of money should be avoided. Since investing does carry with it an inherent risk factor, most financial advisors suggest to invest only the money that you can afford to lose. That's not to say that you'll lose the money (far from it). In fact, the average investor can expect an annual return of 10% from the stock market.
11. Minimum payment. While paying the minimum payment every month for your credit card is perfectly fine, it’s not ideal if you’re wanting to eliminate debt the smart way. Try to find a way to chip away a little bit more than your monthly payment, every month. That way, you will be paying less interest on your balance and more of your principal balance (the money you actually spent).
Finally, what do I do to survive my debts?
First, stop using your credit cards like toys. There aren't toys. Use credit cards when you know you can pay off the balance every month. If that doesn’t help, you can see credit cards as a “last resort” when dire financial hardships arise.
Secondly, make a list of priorities. You should think about what it is necessary for your daily life and what isn’t. To make this easier, you can make use of the numerous financial apps that will make the budgeting process much easier.
You have to keep in your mind that life is a curve, so are you in the right direction?