Zombies, monsters, ghosts, and psycho killer clowns have nothin’ on the fear of real-life money problems. The thing is, most people are guilty of the occasional financial flub. But consistent money mistakes can lead to very scary situations that are hard to come back from. But a little goes a long way in avoiding these types of nightmares. We’ve put together the top 5 scariest financial blunders and how avoid them. The hope is that you can be aware of the traps and use your know-how to dodge them.
The effect of overspending can certainly be an inconvenience. Or, it can be a downright horrifying ordeal, making you question all your life choices. Eeeeeek! All jokes aside, overspending can result in some really scary stuff, like unpaid bills on the low end, and on the high end, an eviction notice. Failing to create a budget is going to be your own worst enemy, because consciously, you might think you have enough cash to splurge (Gucci, anyone?), but in reality, you haven’t accounted for the future. Your best bet is to always put some money away and set a budget for the things you need. You can TOTALLY make an allotment for things you want, too. Just don’t go overboard.
So you know that spending too much on anything isn’t a good idea, right? What you probably didn’t know was that even the most diligent penny pinchers are probably spending more than they should on something. Take for instance, cable or satellite tv – providers typically set you up on a promotion. Most people over time might forget that the promo is for a limited time and end up paying full price at some point. The same goes for electricity (if your city allows for multiple providers to compete for your business). In fact, it’s the same story for any other service that requires a recurrent payment.
To avoid falling into the trap, take an inventory of all of the services you subscribe to. Contact them, one-by-one and ask if there are any promotional deals that you can take part in. Set reminders for yourself to call back after the promo is over. And if there are no special deals available, don’t be afraid to shop around, because – HELLO? You’re the customer and businesses should want to keep you around. Use that to your advantage! Keep money in your pocket.
2) Signing Up for High-Interest Credit Cards
College kids do it…middle aged folks do it too. Heck, most of us have signed up for at least one credit card that we wished we hadn’t. The scariest thing about high-interest credit cards is that you could be paying them off for a very long time. Late payments work against you, and result in fees. Minimum payments work against you, because you’re essentially paying a fraction of your principle debt. And the small cash-back “rewards” you might receive are a drop in the bucket to the interest payments you’re making. You may know all of this. But making the right choices on how to handle high-interest credit cards is something else entirely.
The first way to avoid their pitfalls, is first, to avoid signing up for them in the first place. Use credit card comparison tools like NerdWallet or CreditCards.com to find a card which can help you build your credit that works for you. Look for a low interest rate and a low APR fee.
Also, quit using your credit cards for everyday purchases. When you go to McDonalds, use cash or your debit card. Same thing with gas, clothing, and food shopping. Save credit card purchases for the big stuff, like vacations or even for emergencies. You’ll find that your credit card bill will be a lot lower if…wait for it…you stop using them as often.
If you currently have credit card debt with high interest rates, consider consolidating your debt. This would mean taking out a personal loan with a dramatically low interest rate than your credit cards. Best Egg and Lending Tree are a good place to begin. You’d use the cash to pay off all your credit cards in one fell swoop. And lastly, pay off your personal loan. Plus, you have the satisfaction of paying just one bill per month at a low interest rate. It’s a win-win.
Another option to pay off your credit card debt is to sell your payments for a lump sum of cash if you’ve got a structured settlement or an annuity. The best thing about selling your payments is that you don’t have to pay anything back. It’s your money…but instead of continuing on with a slow stream of payments, you’ll get a large lump sum all at once (contact RSL Funding at 800-543-6513 for a free quote). Imagine being free from debt. Oh, the possibilities!
3) Buying a Brand-New Car
You’ve probably heard this one before: The minute you drive a car off the lot, it loses value. That my friend, is a true story. BUT, that doesn’t mean the quality of the car diminishes. Here’s what we’re getting at. When you’re out shopping for your next new ride, keep an open mind. Stop off at the used car section, look at the gas mileage on something you like, look at its CarMax report; take it for a spin. Even if you’ve had your heart set on a brand-new car (complete with the new car smell), you can probably find a used car that’s just as good with very low miles and at an affordable price. Buying a brand-new car is a money mistake you can absolutely avoid.
Plus, used cars have the new car smell in them too. Score!
4) Quitting Your Job Without a Plan
This is a rookie mistake, for sure. No matter what age or level of professional experience you have, quitting your job without a plan has the potential to have a nightmarish impact on your finances. Even if you’ve come up with a tentative plan – like moving in with your parents or “taking it easy” for a while — being unemployed with no plan in sight isn’t sustainable. Relying on others financially puts an undue burden on them, which can lead to resentment…which can lead to arguments, and lots of aggravation. Debtors will only wait in the wings for so long.
And then there’s the part about being a productive member of society. Having a life-plan promotes well-being for you and everyone you interact with.
So before you quit your job, think about what you want to do next and put a plan in action to have your passions realized. Maybe you’re an accountant but was always curious about culinary school. Take some night classes; develop your skills. Cultivate the right relationships. In the end, create a plan that makes sense. This goes for anyone who’s looking to make their next move. Gaps in employment, lulls in enrichment activities, and sitting idle won’t do much, if anything for your wallet.
5) Falling Behind on Payments
Falling behind on payments is by far one of the scariest money mistakes we’ve seen. If you don’t pay your rent, you could rack up fees, fines, and eventually, be asked to move. If you fail to pay your credit cards, you’ll be charged late fees. Plus, it’ll ruin your credit. Falling behind on your car payment? You could be facing repossession. The list goes on…and its terrifying.
But you can avoid the ominous consequences of not paying your bills on time in several ways. One is to live within your means. Maybe you can’t pick up the fancy $4.99 soap. Maybe you have to get basic cable and opt out of any premium channels. Knowing where your financial limitations are will help you stay current with your bills. Once you build credit and you move up the corporate ladder, you might be able to improve your station in life. But being realistic about what you can afford will undoubtedly keep you out of debt and in good standing.
Another way to keep from falling behind on payments is to save. If you’re making minimum wage, put away $20 per paycheck (or more if you can!) If you’re making a bit more, put away $40. The point is, the more money you save, the larger your security blanket will be, which will be useful if things ever go south. Medical emergencies, holidays, an increased use of household utilities, and more can make your costs higher. Sometimes, these costs creep up unexpectedly. But savings will help you stay on top of your bills.
Lastly, be organized. With the hustle and bustle of life, it can be hard for some people to know what’s-due-when. But setting reminders and having money available to pay bills are going to reduce stress and keep you out of the red.