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5:59 am - Thursday December 8, 2016

Simple Money Hazards to Watch Out For

| Financial Education | Rating: 4.5
by Numan

I was thinking today about some of the stupid money mistakes I have made over the years and wanted to share with everyone some of those “hazards” and some simple remedies you might think about using.

Credit Card Debt Mistakes

  • Impulsive purchases (buying what you can’t afford/not using budget in spending decisions).
  • Acquiring multiple cards (exceeding manageable credit limit).
  • Carrying a balance and/or making minimum or late payments.
  • Using cash advances on one card to pay another.

Credit Card Remedies – Before you buy!

  • Use Impulse list.
  • Ask yourself, “What does it really cost?”
  • Avoid the dangers of consolidation loans.
  • Obey the 3 Laws of the Least to minimize borrowing cost:

Borrow the LEAST AMOUNT possible (Most effective)

Borrow the LEAST PERCENTAGE RATE possible (Least effective)

Borrow for the LEAST TIME possible (Moderately effective)

Automobile Mistakes

  • Not calculating the total costs (purchase based on monthly payment rather than the financial setup).
  • The leasing trap.
  • Frequent turnover.
  • Lack of maintenance.

Automobile Remedies

  • Compute purchase price over the life of the loan; consider insurance and maintenance. (after warranty period)
  • Retain vehicle well beyond loan expiration – continue making payments to your account to prepare for the next purchase.
  • Downscale your car(s) to reduce debt.
  • Purchase is generally favorable to leasing.  Purchase pre-owned vehicle.

Housing Mistakes

  • Buying too much house – not calculating total cost (limits ability to balance the budget).
  • Buying without an operational budget.
  • Borrowing the down payment.
  • Buying one before selling the other.
  • “I need the tax deduction.”
  • Unstable life or work.

Housing Remedies

  • Compute all cost to include payment, insurance, taxes, closing costs, maintenance, improvements, life expectancy of appliance, etc.
  • Ensure total cost fits within budget allocation for housing.
  • Rent, if necessary, while saving for more down payment.
  • Receive the same tax deduction by giving instead of paying interest.
  • Resist home equity lines of credit.
  • Prepay the mortgage.

That’s it for today.  Some simple mistakes we all can/do make and some simple ways to avoid them.

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