Finance Mistakes With Long-Term Consequences


We all make mistakes, but when it’s a financial mistake, it can really cost you. And when it’s one that incurs a consequence that can last several years, then things can really turn ugly.

The following common mistakes, if not corrected as soon as possible, can lead to problems for years to come. Avoid these top financial mistakes that come with long-term consequencesUnfortunately, a whopping 67 percent of the American middle class is making costly financial mistakes, according to a 2012 report by the Consumer Federation of America and Primerica.

The following common mistakes, if not corrected as soon as possible, can lead to problems for years to come. Avoid these top financial mistakes that come with long-term consequences:

High Student Loans

Student loans are, in fact, one of the biggest sources of long-term debt. According to a 2014 New York Daily News article, Americans tripled their student loan debt in the past decade, owing $1.2 trillion. And if you’re not getting a job that can pay for the loans, then you might be making a huge mistake taking on so much debt.

“Getting into more than $30,000 in student loan debt in a profession that pays less than six figures a year is a huge mistake,” says Ellie Kay, author of “Lean Body, Fat Wallet.”

Debt-Free Expert Dave Ramsay, author of “The Total Money Makeover,” adds that there are ways to graduate without student loans.

“You can reduce your student debt by sticking to a state college, always keeping a part-time job, [and] keeping your GPA as high as possible — during high school and college — and the higher your SAT/ACT scores, the more scholarship money they are worth,” says Ramsay.

Credit Card Debt

“Credit card debt is the ultimate wealth destroyer,” says Credit Expert John Ulzheimer for CreditSesame.com. It’s also one of the most regretted forms of financial debt. It’s important to live within a budget and to avoid treating your money recklessly. If you do use a credit card, experts stress to pay it off as soon as possible.

“Debt should be eliminated as soon as possible, so you have control of your income, your most powerful wealth-building tool,” says Ramsay. “Credit card debt is simply used to obtain the ‘I want its’ before you can afford them.”

Buying a Home Above Your Means

Over-leveraging real estate debt is easy when you see a house you want but can’t afford.

“It is easy to talk yourself into that more expensive loan for a bigger house because interest rates are so low,” says CRPC® and Vice President of Strategic Wealth Partners Chris Kichurchak. “But statistically speaking, the average mortgage is maintained for only seven years, which makes it hard to build any equity while the majority of the mortgage payment is going to interest.” Instead of being “house poor” each month, it may be more beneficial to work on building your savings.

Diving into Retirement or Home Funds

“When parents leverage the equity in their homes with a home-equity line of credit or raid their retirement savings in a 401(k) withdrawal to pay for their kids’ college or adult expenses, they are robbing themselves of future security, and they are also robbing their kids of learning the value of working their way through college or making smarter financial choices and dealing with consequences,” says Kay. “This doesn’t mean that parents can’t contribute cash to college expenses or help their families, but leveraging the parents’ future for the child’s future only leads to a future where the kids have to take care of the parents in retirement.”

Not Tracking Spending

In most cases, people buy things as they go through their day, and don’t really think about it. But experts advise paying close attention to your spending. To help, write down every purchase you make, at least over the next two weeks, just so you can see what your spending habits are and understand where you could be saving.

“If you were saving an extra $100 a month, that could mean an extra $100,000 for retirement,” says Investment Strategist for Edward Jones Scott Thoma. “It’s as simple as a cup of coffee a day.”

Contact us today if you’re in need of financial assistance, or just ask us if we can help you get on the road to financial health.

 

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