Managing your finances properly is very important to ensure your financial security in the future, but there are several common mistakes that can undo all of your hard work at managing your finances quicker than you can imagine.
Making one of these common mistakes can consume a large part of your income, ruin your credit score, and cause you to be denied financial products like mortgages and loans in the future.
Fortunately, it is easy to avoid these common mistakes once you have learned what they are. Here are some frequently made mistakes that can make you poor.
Living Without Health Insurance
Medical bills are one of the biggest reasons for declaring personal bankruptcy. If you do not have health insurance and you have an illness or injury serious enough to send you to the hospital, you could be on the hook for thousands of dollars in medical bills. Even if you are young and healthy, you could still become the victim of a car accident or injure yourself playing a sport.
A single incident without health insurance can wipe out your savings and still leave you with a huge debt load. With health insurance becoming more affordable for many people due to new regulations, paying for health insurance coverage is increasingly seen as the better choice.
Having No Savings
People who live paycheck to paycheck and have no savings available are headed toward a financial disaster. It only takes one significant expense that is outside of the norm to cause an avalanche of debt accumulation, often at very high-interest rates.
Regardless of the amount of money you make each month, you can put a little bit away for a rainy day. An emergency fund of $1,000 can be enough to handle many common issues, so aim to save at least that much in a savings account that is easy for you to access at need.
Funding Your Lifestyle With Credit Cards
Many people make the mistake of treating their credit cards as additional money and using them to fund their everyday lifestyle. These people generally carry a balance and rarely see their balance go down by any significant amount.
Using your credit cards to pay bills and not having any savings available to fall back on can result in huge debt problems down the road. A much better option would be only to charge what you are able to pay off each month or to save your credit card swipes for emergency cases and pay off the balance as quickly as possible.
Not Having a Budget
Spending indiscriminately without having a property budget is the quickest way to run through your cash, keep you from saving money, and keep you from falling into poverty each time something comes up. Creating a budget is the best way to make sure your money goes where it needs to go and won’t let your money fly away from you.
Not Living Within Your Means
Spending more than you have and not living within your means is a common mistake that makes people poor. Make sure your expenses don’t get larger than your income by either cutting down expenses or increasing your income.
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