Most Common Financial Mistakes
Updated: Jul 6
Do you wonder why you never seem to have any money even if you earn a decent income? You’re not the only one who needs to learn more about long-term financial planning in 07663.
People tend to fall into several traps that gobble up huge chunks of their income, leaving them with only a little amount of money – or even nothing. Thankfully, you can still save thousands of dollars by steering clear of the most common financial mistakes people make.
What Are the Most Common Financial Mistakes You Can Avoid?
Using Credit Instead of Cash
Did you know that those who usually use their credit cards to purchase items spend about 12% to 18% more than when they use cash? If they don’t pay off their credit card balances each month, they end up spending 50% more on their purchases after factoring in interest and fees.
However, those who avoid impulse spending find themselves saving up to about 23% on grocery bills. Conversely, shopping with cash prevents you from getting into debt. It also protects you from resorting to impulse buying.
Making Only Minimum Credit Card Payments
Although regular credit card payments are a must, you’ll end up spending thousands of dollars if you only make minimum credit card payments. For instance, it will take about 37 years to pay off the $10,000 on a credit card. During these years, you’ll pay around $19,000 in interest if the annual interest rate is at 18.9%.
If you’re making minimum payments on multiple credit cards, you should seriously consider coming up with a plan to pay off your debts within a set period or get some professional help.
Having Expensive Hobbies
Besides providing you with opportunities to exercise, relax, or get creative, hobbies can also make an excellent social outlet. However, if you have an expensive hobby and you’re starting to view it as a necessity rather than an optional activity, make sure that you’re not broke. If you’re broke, it’s best to reconsider it and look for cheaper ways to do it. This usually happens to parents who struggle with their finances while they support their child’s sports.
Living in an Expensive Home
When it comes to choosing a home, the smarter way to do it is to pay your money down on a new place rather than pay rent to someone else. Unfortunately, most people think that since they can afford to pay $1,000 for monthly rent, they can easily afford a $1,000 mortgage payment. This simply isn’t true.
Unless you can afford to pay an additional 40% to your monthly rental payment, you can’t afford to purchase a new house. For this reason, you shouldn’t just commit to a $10,000 mortgage payment if you won’t be able to pay for total housing expenses of about $1,400 per month.
Young couples usually make a huge mistake of purchasing the most expensive house they can afford when both of them are working. If one person’s income drops, they soon realize that they couldn’t afford to pay for the house.
Need Help with Long-Term Financial Planning in 07663?
At 1879 Advisors, we believe managing client’s assets is a long-term proposition. You can count on us to develop a customized wealth and investment strategy for you. Contact us today to schedule your appointment.