Managing your finances is one of the biggest stresses of everyday living. Being in a poor financial state can also lead to deterioration in your mental health, which can affect your relationships with your partner and other family members. This is why it’s essential to try and avoid debt creating situations that will put you in a poor financial situation. To help you avoid these traps, the following are financial pitfalls you must avoid.
Borrowing From Your Savings
If you have a savings account, it can be very tempting to borrow money from it when you are short on funds or want to make a purchase and you don’t quite have enough money. You will have the best intentions to put the money back, but it’s likely you will end up in the trap of replacing the money and then taking it out again towards the end of the month. Ensure you only use your savings for emergencies or large purchases that are essential – that’s what savings are there for.
If you went to college or are planning on going to college, it’s pretty much impossible to avoid student debt. However, you should look at your options in regards to how you can possibly refinance your debt to make monthly repayments easier. Private lenders are able to refinance your loan into a new loan, which will make it easier to manage. If you have children, you should start saving towards your children’s education as early as possible. By doing this you are allowing them to graduate with as little debt as possible and lessening their financial burdens as they try to navigate their way through early adulthood.
Zero Interest Offers
One of the most important financial rules you should stick to is if you can’t afford something at the time of purchase, then you likely can’t afford it all. Zero percent offers are very tempting when you want to buy something and you don’t have the money but you feel you can afford it spread over time. However, if you miss any of these payments, there will be large penalties involved and your debt will very quickly add up. Avoid this trap and only buy things outright unless it is absolutely essential and you are sure you can meet the monthly repayment terms.
By not following household budgeting tips and setting one that makes sense for yourself, it is very easy to overspend each month or week. People often think they can keep track of their expenses without having it written down, but this will lead to you not keeping an accurate record of your incomings and outgoings. Create a spreadsheet or make use of your banking apps to record everything that is coming in and going out. It’s only by doing this will you not be dreading the end of the month when you are struggling to get by as you wait for the next pay cheque to come in. Always budget – by not doing so you are being financially irresponsible.