What are you dressed up as this year? As always, I am putting on my mask and cape as the crusader for financial health. But as we enter this spooky night of hauntings and horrors, I know that there will be a few financial nightmares you want to avoid in the darkness. Here are 13 common financial mistakes and how to avoid them.
Minimum Payments on Credit Cards
If you’re treading water long enough, you’ll lose the energy you need to get to safety. This is what it’s like when you only pay the minimum payment on your credit cards. You should always pay as much as possible each month.
Not Filling up Your Emergency Fund
Do you have an emergency fund? With every paycheck, set aside some money in your emergency fund to have cash when you need it most. It doesn’t have to be a lot, but the amount you save can increase over time.
Drawing From Home Equity
Many people use their home equity line of credit like an ATM. There are a lot of risks and minimal rewards for taking out a loan against your home equity; worst-case scenario, you could lose your home in foreclosure if you fail to make your loan payments.
Getting Title Loans
You’ve seen the commercial’s on TV or drove past the buildings in your community. Title loans are common and popular, but they can be dangerous. They have high-interest rates that make them nearly impossible to pay off, and you risk losing your car or other assets.
Using Payday Loans for Cash Now
Payday loans offer cash before you receive your paycheck so you can have money in your pocket, but they charge insane interest rates. Payments are generally due in two weeks when you receive your next paycheck. They can become a vicious cycle and cost a lot of money.
Sometimes, we cause our own worst nightmares. Everyone has overspent at some point and lived to regret it, but it’s not the end of the world. Recognize your spending habits and work on creating a budget to avoid overspending.
Taking Money from Your 401K
Yes, your 401K is your money, but that doesn’t mean you can use it like a bank. When you take money out early, you risk substantial tax penalties. Instead, let your 401K build until you’re ready for retirement.
Using Credit to Pay Bills
Everyone can get in a bind sometimes. Using credit cards to pay your regular monthly bills can increase your living expenses by a significant amount when you factor in interest rates. Set aside money for your everyday expenses each time you’re paid.
Becoming House Poor
We saw it during the 2007 recession, and we’re starting to see it again. People buy homes they can afford on their current salary, but if they change jobs or become unemployed, they can no longer meet the regular payments. Just because you can are approved for a large loan doesn’t mean you have to buy a house for that amount.
Not Creating a Budget
If you don’t know how much you have and spend, it’s hard to dig yourself out of financial trouble. The very first thing you should do is create a budget. Using an app like YNAB is a great way to get started.
Paying off the Wrong Debt
I suggest paying off the lowest balance accounts first because you can hit more accounts. Since history is such an important factor of credit, you want to keep as many accounts open as possible. Do don’t start out by paying off most of your installment accounts.
Not Setting Up Credit Monitoring
You can avoid many financial problems if you see them immediately. Credit monitoring can help you catch issues as soon as they happen. Then you can take steps to correct the issue before your credit takes a hit.
Not Asking for Help When You Need It
I know from personal experience that you can do everything right and still have financial problems. I struggled alone for so long, and when I finally asked for help, I wished I had done it sooner. That can be you. There is no shame in asking for help, and contacting Best Credit RX is your first step.
Do you want to avoid these scary financial nightmares? Don’t wait to get help with your credit repair. Sign up with Best Credit RX and be your own financial superhero today.