Other than avoiding these pitfalls, make sure to create a budget and stick to it. Once you have a budget and financial goals, it will become easier to work your way out of debt.
1. Forgetting to Pay Attention
Over time, lattes at Starbucks and restaurant dining start to add up. To make sure that these expenditures are not leaving you in debt, you need to make sure that you are tracking how much you spend. Create a budget that includes money for rent, utilities, entertainment, gas, insurance and a personal allowance. If you are unable to stick to the budget at first, set aside your debit card and use cash instead. By easily being able to see how much you have left in your wallet, you will be able to prevent yourself from going over budget.
2. Getting a DUI
Driving under the influence is dangerous to yourself, to the people around you and to your budget. It can cost thousands of dollars once you get a DUI. You may have to pay for the other person’s vehicle, court costs and the price of rehabilitation. The main goal is to never drive under the influence. If you have already gotten a DUI, then hire a DUI attorney. It’s important to get legal help in cases like this, especially since it can often save you money.
3. Using a Credit Card Like Cash
Credit cards are designed to be used for emergencies or as a way to develop a strong credit history. According to research, individuals who use their credit card instead of cash to buy things end up spending 12 to 18 percent more than they would have otherwise. Once you factor in the cost of fees and interest on these purchases, you could end up paying much more for the same item. To stay financially fit, you need to stop using a credit card like cash and avoid impulse buying.
4. Buying a New Car
A new car immediately loses value as soon as it is driven off the lot. When you buy a new vehicle, it will immediately start to depreciate and lose value. Instead of wasting your money on a new vehicle, buy a used car that is relatively new. You will save money on the initial purchase, and the future trade-in value will be much closer to the original price.
5. Forgetting to Save
This is by far one of the worst mistakes that consumers make. You need to have money saved up for at least six months of your normal expenses. This money is essentially a nest egg that will help you to handle emergencies, job loss and medical problems. If you do not have enough in savings, you will go into debt the moment your car breaks down or you need a root canal. Rather than get into debt, make sure that you put aside some of your income each month into a savings account.
6. Paying the Minimum Amount
If you already have a credit card debt, you need to start paying extra every month. Otherwise, you will end up paying drastically more over the course of your payment plan. If you had a $10,000 balance at an 18.9 percent interest rate, it would take you 37 years and $19,000 to pay it off. Rather than pay nearly double the amount you borrowed, you can save yourself money in the long run by paying it off quickly.
7. Expensive Dinners, Hobbies and Pastimes
People love to have hobbies or to enjoy a night out on the town, but this recreational outlet is not always affordable. Instead of stretching your budget thin, choose hobbies that are cheaper. Hiking trips, at-home movie nights and volunteering are all excellent ways to have some fun without breaking the bank.
Debt often happens before you even realize there is a problem. It’s important to be proactive when it comes to your finances. Taking steps each day can make a big difference in your financial well-being.
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