May
In the first article of this series I pointed out some very basic yet often ignored personal trends on handling money. When it all adds up, which it will, you often wonder why and how you got to amount so much debt. Where did it all come from? and what material possessions do you have to prove that you spent it? These are the things you should never do with money and often ignore. These habits have led many into serious financial debt and even bankruptcy.
1. Don’t buy things out of impulse – Going back to the first article I mentioned how we as consumers are targeted everyday and the efforts by commercial entities to market their products are so sophisticated that even human psychology is employed to more effectively entice consumers. What ultimately happens then is that your impulses take over your better judgment and you make the purchase. How many times does this happen to you? Exercise discipline with your finances, minimize your shopping trips and train yourself to ignore the trends and temptations to keep up with them. Make a distinctive evaluation of the product you intend to buy and determine if it’s something you actually need. People have conditioned themselves to negotiate their wants into needs and it’s a habit that only leads to high credit card balances.
2. Ignoring your savings account – If you aren’t actively and systematically saving money in a savings account, then hopefully you’re doing it via your employer’s 401K plan and contributing the most you can in order to get a match contribution from your employer. If you aren’t doing either, then most likely you’re living the paycheck to paycheck routine. Why is this dangerous? Not saving money means you have nothing to fall back on if you were to have an emergency or if you were to lose your job. You may think you can rely on family members to help you, but that only transfers the burdens of your debt on to others. The worst part of not having a savings account is accumulating debt on top of not having any of your own money. It’s a bad habit and it doesn’t prepare you for anything.
3. Paying the minimum payments on credit cards - If you are actively using your credit cards for what you’re judging as necessities you may also be brewing a storm. Credit cards are so heavily marketed that people forget what they’re really for. They’re not so you can get the latest gadget now because you don’t have the cash, they’re not so you can finance your ski trips, they’re for emergencies! Oh yes the credit card company forgot to tell you that I’m sure. If you’re only making minimum payments on your cards, you’re more than likely doubling the total amount owed when it’s finally paid off. The problem with these habits is that sometimes you make yourself feel good by sending a larger payment one month and then think that you’ve caught up, and then you use the credit card again. These are bad decisions and you can find yourself in the kind of debt that often leads to bankruptcy. Pay down your balance, never mind what the credit card company says about the minimum payment, send larger payments and pay that balance down.
4. Lending money to friends and family – You may not want to hear this one because you’re probably very close to your family and your friends may even be like family to you. But lending money to your friends and family can get you in trouble as well. Ask what they need the money for to begin with, people get themselves in trouble financially for a lot of reasons if they are real need then you can certainly make an exception. But you should never support any kind of debt that involves gambling, leisure spending or just any other kind of activity that isn’t a necessity. Lending them all you have can hurt you and put you in a really tight spot financially. This one can be a challenge so careful not too let you feelings take over your better judgment.
5. Never co-sign a purchase contract with someone else – Your mom or dad may have done it for you in the past and you may think that this is ok to do if someone doesn’t have the credit. One thing that is often overlooked in this situation is that if the person who needs you to co-sign for them defaults on payments to whatever it is they’re financing, you are now responsible for those payments. The creditor will come after both of you or whoever can pay the bill. Should you fail to pay for your friend or family member, your credit will be hit with late payment or defaults damaging your credit history. It’s not uncommon that bankruptcy results from such situations for innocent parties who were only trying to help out. Creditors only care about collecting payments and if you’re name is on that contract you’re on the hook.
Related Posts
- Bookmark :
- Digg
- del.icip.us
- Stumbleupon
- Redit it