Have you ever made financial mistakes that you were pretty sure were going to turn out bad, or astronomically disastrous? All of us make bad decisions at one time or another. Either we couldn’t be bothered to research the facts, or we didn't take in the input of our financial advisors. You may have even even made such moves based on ego, wishful thinking, or fear. In any case, the truth is that almost without exception, we have been there and done it. The question remains, are you still making the following terrible money moves.
Using credit cards
We all know this to be true, but it can still be hard to get your spending completely off credit cards. While advantages like increasing your credit score, or receiving a lower interest rate on your mortgage, make good selling points, Using credit requires a level of skill and self-control appropriately manage your budget. Did you know that buyers tend to spend more with a credit card, especially on impulse purchases than with cash? Those swipes add up and consequently, you will be left with hefty card bills that you can’t keep up with. Not only are their interest rates expensive (10 to 20%), they often fluctuate. Then failure to pay them off each month creates even bigger financial mistakes.
Saving and not investing
Whether you are saving up for a holiday, a home, or a car, putting money aside is always a good move. This is because it can help you cover unforeseen emergencies that might crop up. However, using some of your money to make it grow makes good financial sense for your immediate to long-term goals. You can invest in stocks, properties, or mutual funds with the potential to increase in value. Consider investing because inflation can affect the value of cash savings in the future. Plus, you can also lower the level of risk you take when you finance through diversification, which mainly, is spreading your money across different channels of investments.
Buying a new car
One of the most common financial mistakes is the purchase of a new vehicle. According to renowned financial expert David Bach, purchasing a new car is unnecessary. It may be the single worst financial decision you can ever make. Why? A new vehicle begins to depreciate in value the minute you start driving it. By the end of five years, it will have lost up to 50% of its initial value. Buying a car that is coming off, a 2-3-year lease can save you 30%. A used car that looks good, runs well, and most importantly, meets your daily needs means that you can keep up with all the payments.
Forgetting the closing costs
Are you in the market for a home? If you are a first-time homebuyer, you probably know you need 20% down payment and the total mortgage payment when calculating your home loan. But there is more to it than that. Closing costs are required to facilitate the transfer of the title between the seller and the buyer. These fees are calculated based on the property purchased and the type of loan. It’s advisable that in addition to your property down payment, you set aside at least 3% of the purchase price. This will go towards closing costs to help you cover over and above expenses such as loan initiation fee, appraisal fees, title searches, and insurance, surveys, property taxes, deed-recording fees, credit report charges, etc.
Making high-stakes decisions on investments
You should be aware of all-or-nothing type investments, because there are risks associated with such opportunities. Most of the time, such pitches are often from fraudsters using trendy stocks and high-pressure sales tactics. Once they have you in their hooks, they rob you of your hard-earned money. Instead of buying individual stocks, go for low-risk options because they are inexpensive and can earn you a steady return rate.
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