Staying In the Black: 5 Precautionary Measures to Avoid Financial Pitfalls

Staying In the Black: 5 Precautionary Measures to Avoid Financial Pitfalls

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Financial matters affect everyone, and sometimes it can be difficult to find a simple approach to managing your finances. Over 160 million Americans own credit cards, and of the households that do have credit cards each one carries an average of $15,000 in debt. Aside from that, many people struggle with keeping a healthy bank account even if they don’t own a credit card or carry debt. However, following the five tips below can help you avoid financial pitfalls.

Don’t Have/Get Rid of Credit Cards

If you currently have credit cards you should make it a priority to pay them off as quickly as possible. Having and using credit cards for emergencies is one thing, but credit cards used on a daily basis for frivolous items is quite another. If you don’t have a credit card, don’t apply for one. Staying free of credit card debt is one of the fastest and simplest ways to help you avoid financial trouble.

Learn the Difference Between What You Can Spend and What You Can Afford

Many people struggle with the concept of affordability. If you’re looking at an item you want (but don’t need) and you’re trying to decide whether it’s a good idea to buy it, ask yourself if you can afford it. However, there’s a difference between being able to spend a certain amount and being able to afford it. If you have $200 in your account and you’re looking at a $100 item you certainly have the $100 to spend. However, you can’t afford it because you will likely need that money for bills and necessities. Always ensure you have a financial cushion before you spend frivolously. Controlling your spending is one of the best ways to avoid financial issues.

Save Every Month

One of the best ways to avoid financial problems is to be prepared for emergencies. When many people think of saving money or keeping a savings account they often think that it’s not possible because they are on a budget. But no matter how little or much you make, you can always make room to save money. One way to save money is to choose one thing you will sacrifice per week (or day), and put that money in a savings account. For instance, let’s say you cook at home one night instead of going out. Calculate how much you would have spent on eating out and put it in your savings account. Even if it’s only a few dollars here and there it can add up to quite a lot of money, which can help you out when rough times or unexpected events come your way.

Take Action Sooner Rather Than Later

Financial pitfalls don’t exist only for those who haven’t run into financial trouble yet. You can worsen a bad financial situation by falling into further pitfalls, like delaying action. If you have a large amount of debt or financial issues, take the time to negotiate with lenders and creditors, speak with professionals, or even seek out debt consolidation or financial management services if need be. The sooner you take care of your financial problems, the faster you’ll be able to get back on your feet.

Spend Now to Save Later

One thing that is commonly ignored by people who are trying to save money is insurance. Whether it’s health insurance, renters insurance, or another type of insurance, it is important to protect your property and health. While many people avoid purchasing insurance because they feel it will help them save money, it can actually lead to large amounts of debt and big financial problems in the future. Spending a little on something like health insurance now is much less expensive than having to spend thousands of dollars if a medical emergency occurs. Similarly, protecting your home and car will help you avoid expensive replacement and repair costs should something happen in the future.

Following these tips can help you avoid financial pitfalls. Whether you have a healthy bank account and no debt or you’re fighting your way back from bankruptcy you can still fall victim to financial pitfalls. Knowing how to properly manage your money and protect your assets can help you stay financially secure or work your way back to a healthy financial state as soon as possible.

Information Credit to Drayden Insurance Ltd., and Edmonton insurance broker.

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Categories: Money Management

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