4 Bad Habits that Will Lead You down the Financial Path of Debt
Monday, November 20, 2017, 6:00 AM | Leave Comment
If you have gone through the educational system in the United States today, you probably lack training in the fundamentals for financial success.
From the formative years on, kids see credit and payment plans as ways to get things now. Unfortunately, societal peer pressure for minimizing debt and saving for the future is lacking.
Debt can be crippling, and here are four bad habits that lead you down that path.
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Stop Carrying Balances on Credit Cards
If you can charge purchases and pay the balance off every month when the bills come due, then you are using credit cards wisely.
If you have to carry a balance to the next billing cycle, you are throwing away money. Unless you get a promotional rate for something, such as 12 months no interest, and make regular monthly payments, do not carry credit card balances.
Another thing is to stop just making minimum payments on credit card balances. It could take you years to pay off the balance on a credit card, and you will pay a fortune in interest.
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Determine Not to Live Beyond Your Means
Your credit score and income may make you eligible for a brand new car that has all the features you want.
However, the amount you are paying can have a negative impact on your future. The same goes for a mortgage. Just because you may be eligible for many thousands more for a mortgage does not mean you should go that route when buying a home.
The two major purchases are homes and vehicles. Do not buy based on the maximum you can afford. Make major purchases like this based on the minimum you need and would be satisfied with.
Buying used cars over many years and living in a smaller house could let you retire early.
Consider your future priorities rather than satisfying current desires.
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Pay Loans Ahead
Every dollar of interest is money added to the cost of whatever it is you bought.
For example, if you bought something for $22,000 and paid $2,000 in interest over the life of a loan, you paid $24,000 for the purchase.
Paying loans ahead reduces your interest burden. In some instances, making biweekly instead of monthly payments can save you interest.
Determine to pay off loans ahead of schedule as much as you can. The saved interest is money you can apply to something else.
Some loans, such as car loans, mortgages and loans to pay for children’s orthodontics, are a fact of life. Not committing to paying them off early leads to more money being spent.
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Avoid Quick Cash Schemes
The so-called payday loans are one of the worst ways to obtain money to pay for anything. They are not far from being loan shark types of loans.
An emergency that would require you to be forced into getting a payday loan today can make your financial situation even worse.
If money is that tight that you need to get a high-interest short-term loan, then you likely will have difficulty paying back the debt. This can lead to an endless cycle of worsening debt.
Go out of your way to find alternatives to getting payday or quick loans as much as possible.
If bill collectors are calling and you are having trouble making ends meet, then a debt consolidation loan may be a viable option.
One low payment that covers all your debt versus making individual payments can free up cash. However, make sure you use the extra money wisely, such as repaying your consolidation loan faster.
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