Every day, you’re surrounded by advertisements trying to sell you something. Unfortunately, if you give in to your desires to own the latest and greatest of everything instead of honing your money management skills, you could face financial ruin.
Here are eight ways you may be destroying your finances:
1. Not having a budget. Spending money without having a budget is dangerous and can be devastating to your bottom line. If you don’t have a budget, be sure to create one so that you can understand how much money you have, what you can afford to spend each month, and where all of your money really goes. Understanding your budget is the first step toward managing your money.
2. Living off credit cards. Don’t charge anything to your credit card that you can’t pay off right away. Carrying a high balance on your credit card increases the amount of interest you will have to pay back, and a high balance can negatively impact your credit score.
3. Not saving for emergencies. You may be in the position to pay your bills on time now, but without a rainy day fund, you can go downhill fast. Start saving a little bit each month so that you have extra funds to rely on if you face illness, employment changes, or a death in the family.
4. Buying a car you can’t afford. Consider all costs associated with purchasing a car, including insurance, registration, and interest over the life of a car loan. Go to the dealership with a budget and stick to it. Don’t stray from your budgeted amount—you don’t want to be in a position later where you can’t afford the repayment.
5. Renting-to-own. The attractive rent-to-own advertisements may be tempting, but the small weekly and bi-monthly payments will nickel and dime you until the item is paid off—usually at a much higher price than the item is actually worth.
6. Ignoring retirement. Start saving for retirement now if you don’t want to work until you die. Retirement funds won’t magically appear, and you will likely not have sufficient income from Social Security to support yourself. If you don’t save for your retirement, no one else will.
7. Not having a backup plan. If you get hurt or your spouse passes away, you’ll still need to pay your bills. Too many people ignore life insurance and disability insurance policies, which can help pay your bills in the event of illness, disability, or death.
8. Taking care of others first. This is often especially true for women. Whether it is ailing parents, children, or their spouses, women are more likely to put others first and not care for themselves. Remember that your credit, finances, and retirement goals are just as important as the ones they are caring for.