1. Trying to keep up with the Joneses
We have all seen our friends and coworkers with some new purchase that we can’t help but be jealous of. That jealousy is a dangerous thing which can lead to unnecessary purchases. Don’t plan your purchase around others who could possibly be making bad financial choice. Trying to keep up is often an unwise way to spend your money.
2. Spending too much on credit
Purchasing something on credit is a convenience, but also can be a hindrance on your financial wellbeing. Credit is basically a loan and should be viewed as such. Really consider any purchase that you can’t afford to spend cash on right now. Only paying the monthly minimum payments on a credit card will have you paying a fortune in interest and put you deeper in debt.
3. Having a reduced income, same expenses
Whether from a layoff, reduced hours or a spouse having to take some time off, you’ll need to adjust your budget in accordance with any changes to your pay. Not making changes could lead to large debt and stress.
4. Family spending issues
Communication is a key skill to have when earning money, but perhaps even more important in keeping it. As seen on TV time and time again, a wife sneaking out on a shopping spree or a husband trying to hide his new set of golf clubs can cause financial headaches. Even small purchases add up. You need to understand your financial capabilities, and then share them with everyone in your family.
5. Not creating a budget
This is seen as a problem on every personal finance website, blog, article and app out there. It seems like a no brainer but according to the National Foundation for Credit Counseling, nearly two-thirds of adults don’t track their spending. Writing down you expenses can make identifying unnecessary purchases incredibly easy, and gives you a point of reference on the path to improving your financial health.
6. Helping a friend with a loan
On occasion someone may ask you to cosign a loan or borrow some cash. The old adage of never lending a friend money holds true. If for some reason they were to not able to pay the loan back, you are losing money, and possibly stuck making monthly payments. Don’t risk your financial health for a something that could strain your friendship as well.
7. Using credit to pay debt
Getting debt consolidation loans can be a great way to roll several debts into one single payment with a low interest rate, but be aware. The best plan of action is to create a plan for paying off the debt rather than taking on new debt to pay it off.