Mistakes are made with money everyday by everyone when it comes to personal finances basics. Some of the most wealth people on the planet make mistakes, people in the middle class make mistakes and the poor make money mistakes. It is an almost unavoidable issue. The less money you have, the more those mistakes can hurt you. What are the biggest money mistakes people make? Let's learn more why this happens.
1. Neglecting Your Credit Scores
These three-digit numbers are more important nowadays than ever, especially today with more and more people defaulting on loans and mortgages. Money lenders are extremely cautious about to whom they will lend money.
Banks often look for low-risk borrowers. If your credit rating is at 750 or higher, banks will do almost anything to get your business. A high credit score also means that they will give your great rates on mortgages, vehicle loans, personal loans and credit cards. Insurance brokers and landlords often times use credit scores to determine potential customers or tenants, for this reason it is crucial to maintain your credit.
Do you know your credit? There are all kinds of resources that can give you an idea of where you stand. They will help with your personal finances basics.
2. Carrying Credit Card Debt
If you carry a balance on your credit card you will end up paying ridiculous interest rates but you also ruining your chances to get a mortgage or other kind of loan and you are damaging your credit score. If you want to fix your personal finances you must eliminate your credit card debt. If you need help in eliminating your credit card debt get it.. Leverage is important for you if you want to get a loan and you need to have good credit. The more quickly you eliminate your credit cards the better you will be.
3. Too Much Home or Auto Debt
In an ideal world you should never exceed 30% of your gross income when it comes to your mortgage. Along the same line of thinking, how much you pay in transportation expenses should not be greater than ten percent of your income (those numbers include insurance, fuel and maintenance). If you are paying more in either or each of those categories, you are likely in over your head when it comes to home or auto debt.
What should you do? You may need to rethink your living arrangements. If you can't afford a house with a thirty year fixed rate mortgage, you can't afford to live there. If you are unable to pay the 60 month loan on your car, you should be driving that vehicle. Those are simple personal finance basics you should know.
4. You Tapped Into Your Emergency Fund or You Don't Have an Emergency Fund.
The value to have money in hand has become increasingly valuable with each passing day. You should have an emergency fund. That fund can assist with paying for unexpected expenses such as car maintenance and it could cover your bills if you lose your job. Most people try to create an amount that will cover 3 months living expenses. For families it is wise to be able to cover six months. Obviously the more, the better. If you haven't yet created an emergency fund, it's time to start making one. Start by setting a goal of creating a balance of $1,000 and then go from there.
Making mistakes with your finances is often inevitable. The fewer mistakes you make the better off you will be. If you are able to avoid these 4 crucial errors, you will start to enjoy the financial freedom you desire. Trying to live within your means, staying up with your debts and your credit are the personal finance basics we should all take care of. If you start to set goals and tackle one of these things each month you will be rewarded financially in very little time at all.
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