Many Americans fall victim to their own financial mistakes and never truly understand what they did wrong. Even the richest members of our society need to pay close attention to monitoring their finances. Take great caution when you are dealing with the following financial situations, or you will risk going broke. This list is great for people in debt who are looking for a way out. Remember, it’s never too late to make a change–start today and get your finances back on track!
1.) Remaining in Credit Card Debt
Credit cards can be a useful tool, but you should only use them if you are absolutely sure that you can afford to pay your balance at the end of each month. If you don’t that’s when the interest will kick in. Many credit card companies will charge you over thirty percent interest for an outstanding balance. They want you to make the minimum payment, because the longer the money is owed, the more interest you will ultimately pay. If you are currently in credit card debt, you need to put all of your available resources into paying it off. Take a fiscal fast, and start chipping away the best you can. Sometimes credit card debt is unavoidable, but you always need to make sure that you are able to pull yourself out. Fooling around with credit card debt can have a devastating effect on your financial situation.
2.) Expensive Car Lease
Sometimes people prefer to lease cars, which is fine for the right people. If you own your own business there can be excellent tax incentives, and sometimes dealerships will offer superb rates with smaller down payments. However, if you lease a car, you need to calculate the total amount that you will end up paying over the life of the lease. Some car dealers offer what seem like excellent deals, but if you break down the numbers, it’s clear that you are overpaying for your new ride. If your credit score is an issue that prevents you from buying or leasing a vehicle at a reasonable rate, then maybe you should consider buying a used car until you can rehab your credit. Don’t just jump at the first deal you see, because you’ll likely regret it.
3.) Overspending on Food / Household Goods
Some people don’t take advantage of savings on groceries and other common household items. We’re not talking about extreme couponing, but you should always keep an eye out for good deals on the items you commonly buy. If you are shopping for yourself, the savings will be less significant that someone with a family. However, people who look for deals regularly save between 25-30 percent or more on their grocery bills. For a 100 dollar tab, this is a significant amount of money to be saving each week.
4.) Buying a New Car
The allure of purchasing a brand new vehicle can be very enticing. However, it’s always a good idea to consider a used vehicle. Consider looking for cars that are two or three years old, because cars will depreciate the most over this period of time. Just because your car payment is affordable doesn’t mean that you can actually afford the car. If you have other debts to pay off, you should try saving some money and buy used. Use the money you save to pay off your other debts. There will be time to buy a new car later when you fix your financial situation.
5.) Frivolous Spending
This step is a no-brainer, but it cannot be overlooked. If you are in debt and need a way out, then you need to start by curbing your spending habits. No more shopping and going out to dinner—it’s time to get serious. Take a step back and look at all of the things you buy. Maybe you stop for coffee every morning, and spend three dollars daily. That’s twenty one dollars a week, which is over $1000 per year. When you look at your expenses from a long term perspective, it shows you how much money you could be saving and throwing towards your debts. Also, you can save money without dramatically influencing your lifestyle.