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Money mistakes are a part of life. No one is perfect when it comes to managing their personal finances, and you don’t have to be.
But, certain errors are harder than others to recover from. In particular, if you make any of these three money moves, you could be setting yourself up for real problems.
Paying your bills late consistently can cause you a host of issues. For one thing, you could seriously damage your credit, as a single payment on a credit card that’s more than 30 days late could cause your score to drop by over 100 points.
Paying late could also result in your lender charging added fees, which makes your debt more expensive. If you really fall behind, you could also face foreclosure or repossession, which could mean losing your home or vehicle.
You don’t want to pay late, so set up autopayments for at least your account minimums to ensure this doesn’t happen to you. If you can’t pay as a result of financial hardship, reach out to your creditors ASAP to find out what your options are. They might be willing to work with you on a payment plan or even put your loans into forbearance temporarily until you get back on your feet.
Carrying a balance on your credit card can get really expensive. The average credit card interest rate is 21.47%. That’s a high rate. If you are consistently carrying a balance, you’re going to waste a lot of money over time.
Let’s say you pretty much always have around a $5,000 balance on your card at any given time. If your card has a 21.47% rate, you’d pay around $91.98 in interest per month. If you do this for months on end, you can see why you would end up wasting far too much of your hard-earned cash.
Instead of paying your card issuer interest forever, try to repay any balances you currently owe ASAP by making payments that are larger than the minimum due. Moving forward, try to live within your means by making and sticking to a budget so you won’t charge more than you can afford to pay off in each billing cycle.
Finally, skipping retirement investing could be a real problem that you regret. Eventually, you’re going to get too old or sick or tired to work. And, at that point, you must have money to supplement Social Security. Your retirement benefits only replace about 40% of your pre-retirement income. It’s really hard to live on so little, especially if you have costly health issues as a senior.
To make sure you have the money you need to retire, start saving in a 401(k) or IRA you open at a brokerage account ASAP. Even if you can’t save a lot right now, small sums add up over time.
Fortunately, you now know how to avoid three major money mistakes that will almost certainly lead you down a dark financial path.
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