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