It’s not always easy to make all the right moves when it comes to money.
That’s horrible! So much for saving for a house, rainy day, or even retirement.
The good news: It doesn’t have to be this way. Most common financial mistakes are pretty easy to identify and correct. Here’s five of them that you can take care of right away.
1. Late Payment of Bills:
Paying a bill only a few days late can show up on credit reports, especially if one of those bills is your credit card bill or any other loan repayment. With modern technology there’s no reason you have to ever miss any payment ever! If you haven’t taken advantage of automating as many of bill payments as you can, then do it. Not only can it make a big difference to your financial health but it can also save you a ton of time writing and mailing checks.
2. Spending Money We Don’t Have:
We’ve all done it; held our breath and bought something knowing we didn’t quite have the amount to cover it in our savings account. We promise ourselves we’ll fix it up as soon as possible – and then try to pretend the whole thing never happened. Sound familiar?
Perhaps you borrowed the ‘gap’ money or sold something to cover it off and avoided the thin end of a debt-fueled wedge, but the reality is that this type of money habit is not a good idea. What you need is a solid financial plan; a budget to keep your spending on track.
3. Allowing Insurance Policies to Lapse:
Another all too common one: Allowing the existing policy to lapse while you try to find time to look for a new, better one. While it is a good idea to shop around for insurance, it is not smart to be without it for any length of time, especially of you have a family to consider. Healthcare without insurance costs a bomb, so it doesn’t pay to be without it. Murphy’s Law states that as soon as you let it lapse, something will happen and you’ll really need it.
4. Higher than Necessary Debt to Income Ratio:
Don’t let your money become a nightmare. If you’ve let expenses creep out of hand lately, then this one’s for you. The ideal debt to income ratio for lenders is around 35% or lower. This can be tough to maintain if you’re running a tight family budget, but aim to get as close as you can. If your debt to income ratio makes you nervous, it’s time to look at your expenses. Cutting costs is the fastest way to make a difference to this equation.
5. Maxing Out Your Credit Card:
This one happens to everybody at least once – and it’s usually entirely avoidable. There are emergency situations, sure, but aside from those, there should never be any reason to take your card to its limit – and certainly not on a regular basis.
There are specialized financial mistakes that most people will probably never understand completely – like those which caused the Global Financial Crisis (GFC). Then there are the little ones; the ones everyone makes, and hopes no one will notice. The thing about money is that everything is recorded and tracked – so someone might not know, but they can always find out.
If you find you are having trouble with your financial reputation, there are organisations that can help. They can also tell you how to amend your future behavior around money, so that you can clean up your credit.
Readers – Are you guilty of any of the above common financial mistakes? Share your story in the comments below.
Featured image courtesy of Flickr – Douglas Muth