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10 Money Mistakes You Can Easily Make

10 Money Mistakes You Can Easily Make

It would be hard to go through life without ever making a money mistake. Making a money mistake isn’t always a bad thing though. You need to recognize that you made an error and making a correction to change for the better. Here are 10 possible money mistakes that you can easily make.

1. Not having retirement or investing on your mind.

Many people think to themselves that they have plenty of time to save for retirement and that they don’t need to start just yet. However, that is not always the best way to think about retirement. Saving money now can help you down the road because every little bit counts.

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2. Not having a will or trust.

Going without a will or trust is not a good idea. You want to be able to determine what happens to those you love and what happens to the things that you have if something were to happen to you. Also, setting up a trust can help your family out if you don’t think that they will do what is best for them with the money that you leave them. This way you can continue to take care of your family if something were to happen to you.

3. Having debt.

Regardless if you classify your debt as “good” or “bad,” if you are paying a high interest rate because of your debt and losing money, then this is probably a money mistake. If you can’t earn a higher return for your money, then you should be paying off your debt as fast as you can so that you can start earning a return on your money.

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4. Not thinking about an emergency fund.

Do you have an emergency fund? Some say that you should have $1,000 (if you have debt), others say that you should have six months. You need to determine what is right for you and what you feel comfortable with. A good emergency fund can protect you if an unexpected expense were to come up. An emergency fund may be saved to cover a job loss, home repair, a cut in hours and so on.

5. Going without insurance.

Going without insurance can be one of your money mistakes that you make. You should always try to have some level or car insurance, health insurance and life insurance. Going without these forms of insurance or an adequate level could mean that you will have to pay a large expense if something were to come up.

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6. Not saving money.

Are you spending more money than you bring in each month? You should be aiming to save money each month and not spend every single penny.

7. Going without a budget.

No matter how much money you make, you should have a realistic idea of what your income and bills are each month. If you are making $200,000 every year and spending $200,000 every year, then you are not doing the best even if you think you are. Having a budget can show you where you are making mistakes and where you can possibly improve.

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8. Lending money to others without thinking about the consequences.

If you ever lend money to others, then you really need to think about the consequences. Whether you lend cash directly to them or you cosign on a loan, there are negatives that could possibly happen. You have to be prepared to lose when lending money to others.

9. Using credit cards as a form of income.

There are many people out there who are bad with credit cards and use it as a form of income. If you think that you will rack up credit card debt, then leave your credit card at home! Also, only buy what you can truly afford.

10. Trying to keep up with the spending of others.

Do you find yourself spending more in order to keep up with the spending of others? Maybe someone bought a big house and you feel the need to buy a big house as well. Whatever the case is, you should analyze why you actually want something, especially if it is a big purchase. You should learn to be happy with yourself and realize that material purchases do not make you a better person.

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Last Updated on March 4, 2019

How to Use Credit Cards While Staying Out of Debt

How to Use Credit Cards While Staying Out of Debt

Many people will suggest that the best thing to do with your credit cards during these tough economic times is to cut them up with a pair of scissors. Indeed, if you are already in huge debt, you probably should stop using them and begin a payback strategy immediately. However, if you are not currently in trouble with your credit cards, there are wise ways to use them.

I happen to really love my credit cards so I will share with you my approach to how I use mine without getting into deep financial trouble.

Ever since about 1983 when I got my first Visa card, I continue to charge as many of my purchases as possible on credit. Everything from gas, groceries and monthly payments for services like my cable and home security monitoring are charged on credit. Despite my heavy usage, I have maintained the joy of never paying any interest fees at all on any of my credit cards.

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Here are some tips on how best to use your credit cards without falling into the trap of paying those nasty double-digit interest fees.

Do Not Treat Credit Cards as Your Funding Sources

Too many people treat their credit cards as funding sources for major purchases. Do not do this if you want to stay out of trouble. I use my credit cards as convenient financial instruments so I do not have to carry around much cash. In fact, I hate carrying cash, especially coins. When you buy things on credit, the purchases are clean and you will not get annoying coins back as change.

I do not rely on my Visa, MasterCard or American Express to fund any of my purchases, large or small. This brings me to my golden rule when it comes to whether I will pull out any of my credit cards either at a retail or online store.

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I never purchase anything with my credit cards if I do not have the actual cash on hand in my bank account.

If I really cannot pay for the item or service with cash that I already have at the bank, then I simply will not make the purchase. Remember, my credit cards are not used as funding sources. They are just convenient alternatives to actual cash in my pocket.

Make Sure to Always Pay Off Balances in Full Each Month

The next very important part of my overall strategy is to make absolutely sure that I pay the balances in full each and every month no matter how large they are. This should never be a problem if the cash has been budgeted for my purchases and secured in the bank. I have always paid my full balances each month ever since my very first credit card and this is why I never pay interest charges.

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Using Credit Cards with Rewards

Most of my credit cards are of the “no annual fees” type, including one MasterCard on a separate account I keep at home as a spare in case I lose my wallet or incur any fraudulent charges. However, I do use a main Visa card which does have an annual fee because all purchases on that card reward me with airline frequent flyer points. For me, the annual fee is worth it since I do travel and I get enough points to redeem many free flights.

You have to decide for yourself if you will charge enough purchases on credit each year without paying interest charges to warrant a credit card that rewards you with airline points (or other rewards). In my case, the answer is “yes” but that might not be the case for you.

I occasionally use a MasterCard or American Express card on small purchases just to keep those accounts active. Also, I have been to the odd retailer that accepted only a certain type of credit card, so I find that having one from each major company is quite handy. Aside from my main Visa card which earns the airline points, the rest of my cards are of the “no annual fees” variety.

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So this is how I use my credit cards without getting into any financial trouble with them. This strategy is recommended only if you are not in debt, of course. In fact, it is worth keeping in mind once you’re out of debt so that you can keep your credit cards active and treat them responsibly.

What are your credit card usage strategies? Let me know in the comments — I’d love to hear what methods you use.

Featured photo credit: Artem Bali via unsplash.com

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