Being in charge of your finances is no funny business. Even though we don’t get the right personal financial education in school, we’re still “thrown” into the grown-up world to face fees, payments, interests and debts without knowing how to handle them correctly. We will brings you the 5 most common personal financial mistakes people make and how to avoid them or make them right. Or you can visit Biggietips for more finance/investing advice.
1. Paying off debts with savings
When placed with an important debt, you might be tempted to think that using your savings to pay off is a good idea, but it’s definitely not. People who take money out of their savings to pay debts always thinks they’ll replace the money from their savings account later, in a hurry to get rid of the debt. But once the debt is gone people no longer feel urgency to replace the money in their savings, which will affect them in the future or in case of an emergency. Remember that your debts should always be covered comfortably by your steady income and should never come from your emergency funds.
2. Using home equity to cash out money
Another important personal financial mistake most people end up making is relying on their home equity like it was a “piggy bank”. You’ll find tons of financial services that offer to loan you money to pay for your kids’ college or other big numbers by placing your house as guarantee. Not only is this the wrong choice because of the added interests, it can actually end up being bad business for you in case you try to sell your home later on.
3. Ignoring or not taking care of your credit score
Keeping an eye for your credit score might save you important amounts of money in the future and in the present. The better your credit score, the better the interest rates you can get offered by car dealerships, banks and real estate agencies. It’s important that you keep track of your credit score at least every 3 or 4 months, and always take actions so you can improve your score with the help of a financial consultant.
4. Paying all sorts of unnecessary fees
We live in a world that’s financially designed to slide tricky fees under the door at every chance. As a consumer you should always be on the lookout for different sorts of fees, from late payment fees on your bills and ATM fees to checking account fees. Make a good planning so you make sure you never rely on unnecessary fees again, and in a year’s term you’ll realize you saved big bucks in your bank and other utilities like your cable and electric bill.
5. Lending money and not keeping track of this
This is a very tricky business because everyone has a soft spot for their friends and family and has a need to help them sort out their problems, even when they’re financial. Most financial experts recommend to NOT loan money, because you run a great risk of never getting paid the full amount, taking the money right from your savings and then needing it for an emergency, or even never seeing that money again. Personal loans are responsible for ending lifetime relationships and they almost never end well. If you’d like to help out a relative or friend when they’re having money troubles, see if you can help them reach a solution, contact them with a professional loaner or even help them out get a side job; there are plenty of things you can do for them without compromising your economy.
Being responsible for your personal finances is not as hard as it sounds. You should always keep in mind that the choices you make today could affect you greatly in the future, and with this thought take action to have a comfortable and stable financial future.