Top 5 Money MistakesJuly 4, 2013
How much money one has in the bank has little to do with their annual salary, and instead has much more to do with how they handle their money. Millionaires go bankrupt everyday; the golden key to finding financial security is to avoid making the most common money mistakes, helping you to plan for a more secure and prosperous future.
1. Not Shopping Around For a Better Mortgage Rate
One of the biggest money mistakes people make is sticking with the first loan they are approved for, an unfavorable decision unless you like to see money fly out the window. Take a look at interest rate trends before making any final decisions; with fixed and variable mortgage rates available it’s important, and possible, to find the overall least expensive rate on a mortgage. By pricing around a few different lenders and doing a cost base analysis to compare your options you will be amazed at how much you can save. Pricing around can save you thousands; take this money and put it into savings and already your financial outlook is improving.
2. Paying Too Much Interest
How much interest do you pay every month on each of your credit cards? What about collectively? Paying high interest fees is just like wasting money when there are ways to avoid paying it—and oftentimes there are. For starters, before you open any credit card make sure to shop around first, looking for the lowest interest rates and annual fees offered. If the credit cards you are currently paying off have high interest rates, look into transferring your balance(s) onto a card with a lower rate. If your credit has improved since you applied for your current credit card you might find you automatically qualify for a lower interest rate.
3. Not Checking Your Credit Score Regularly
At least 20% of credit scores contain errors, which makes sense considering individuals are responsible for filling all credit reports out, and after entering numbers into a computer all day, it is only human they will make a mistake here and there. Thankfully, if caught on time, these mistakes can be fixed and corrected, but if left unchecked they will fester into sores that harm your credit. Not only do credit reports expose mistakes, but they can also alert you to fraud. It takes on average around 6 months to a year before fraud is detected, but by checking your credit report regularly you could potentially catch fraudulent activity much sooner. An unchecked credit report can cost you more in several ways, including hiking up the amount you will be quoted to pay for interest on future loans, mortgages, or credit cards. Forbes Business suggests checking your credit report as often as 3 times a year.
4. Skipping Out on Insurance
It might seem nice to save money every month by ditching insurance plans, be it life insurance, renters, or any other personally relevant insurance; but in reality we can never predict what is going to happen. By taking shortcuts we might win in the near term but if something unexpected occurs an entire life savings can be depleted quite rapidly. Finding the most affordable options that provide financial security in the case of an unexpected calamity is crucial to keeping your life in check, no matter what happens. In fact just as important as having emergency savings is having a good insurance policy on the things that matter most.
5. Accepting Debt as the ‘Norm’
Sure, the majority of the population has debt, and we all know someone who has more debt than we do, but that doesn’t mean debt is good for us. Debt has become so normalized in society that having it seems like a constant state of life; but these rationalizations are exactly what keep people in debt for their entire lives. The first step to getting out of debt is to change your mindset. Of course, some debt is better than other debt; say for example the mortgage on your house would be good debt because once paid off it will benefit your future, while bad debt includes clothing that will go out of style in a year, or fancy dinners charged to platinum credit cards—these are the things that add up quickly and take years to pay off; costing us more than it was ever worth in interest.