At one time or another, we’ve all made some financial goofs, whether it’s forgetting to pay a bill, bouncing a check, or overcharging a credit card. These types of mistakes are part of life, but too many of them can lead to serious money problems. Here are six financial pitfalls you should watch out for:
Failing to budget.
The old quote, “If you fail to plan, you plan to fail” rings true when it comes to budgeting. A budget is a weekly, monthly, or yearly plan for your spending and a must for tracking and controlling your money. If you are trying to save money or get out of debt, a budget can help you reach your goals. Failing to budget often results in overspending.
Making only minimum payments.
Have you ever wondered why your credit card balance never seems to budge, even though you make payments each month? If you carry a balance on your credit cards, minimum payments are your worst enemy. Minimum payments are designed to keep you in debt as long as possible, with most of the payment going towards interest and little going towards principle.
Maxing out your credit cards.
Multiple credit cards at their limit can be bad news for your finances. Your credit utilization, or how much available credit you have, makes up a third of your overall credit score. When your credit is maxed out, it lowers your score significantly. It also indicates to lenders that you have a spending problem or rely too heavily on credit, neither of which is good.
Not having a savings account.
If your car broke down tomorrow and needed a $1,500 repair, would you be able to cover it? A savings account or emergency fund is a must for unexpected situations. Having just a month or two worth of expenses set aside can help get you through a job loss or emergency without having to go deep into debt.
Never checking your credit report.
As many as one third of all Canadians have found errors on their credit reports. These errors can lower your credit score significantly and end up costing you big time. Not only will you have to pay much higher interest rates, but you could be denied credit altogether. Credit reporting errors can take months to fix, so it’s important to check your report regularly.
Waiting too long to seek help.
If you’re experiencing financial difficulty, it’s important to seek professional help as soon as possible. Waiting too long can limit your options. A free consultation with a licensed insolvency trustee can help you find out the best way to get your finances under control, whether it’s simply learning how to manage money through credit counsellng or filing a consumer proposal to pay off debt.
These financial pitfalls can wreak havoc on your overall financial well-being. While it’s best to avoid these scenarios, they can still happen no matter how careful or disciplined you are with your money. Consulting with a licensed insolvency trustee can help you take control of your finances and avoid these pitfalls.