#1: Not Saving Your Hard-Earned Money
New data shows that 42% of Americans have less than 1,000 in savings. Saving money is important because you never know when something bad might happen.
For example, say your tire goes flat, and you must pay over $200 to replace the tire. Saving money is also important when making larger purchases like buying a new can, furniture, or a new laptop.
To avoid this common mistake, you must practice controlling your spending habits and develop good money management skills.
Create a budget for yourself on how much money you can spend on things like groceries, entertainment, etc.
#2: Not Opening a Retirement Account
This is a big one. A news article by CNBC stated that around 55% of Americans are behind on retirement savings. Many retirees cannot stop working because they didn’t save enough for retirement.
Do you want to be working your whole life? If not, then start saving for retirement now.
When you open a 401k, your money will not just sit there and do nothing; it will grow with interest.
To better understand how retirement accounts work and the risk associated with investing in one, it’s best to consult a qualified financial advisor.
#3: Credit Card Debt
Having a credit card is a big responsibility. If you struggle with money management, then it might be ill-advised for you to get a credit card.
It’s always recommended that you develop good money habits first before applying for a credit card.
That’s because if you’re not good at managing your credit card, you could accumulate debt and ruin your credit score.
Each time you miss a credit card payment, you hurt your credit score.
This is because companies use credit scores to determine whether you are someone who makes payments on time.
#4: Education Debt
According to bestcolleges.com, the total average cost for a year of college at a four-year school, including tuition, fees, room and board, and supplies, was $35,551.
How much most students pay in college tuition is the same cost of buying a car or a third of the cost of buying a house.
These students take out $35,000 or more without a job lined up or any means to pay it back.
Keep in mind this is just tuition for one year. If you decide to stay for three more years, you could owe hundreds of thousands of dollars.
Sometimes going into debt to attend a university can pay off if it leads you to a promising career. However, suppose you default on your student loan payments due to your inability to afford payments.
In that case, it can have a devasting impact on your credit score. It can make it harder for you to qualify for an auto loan or get approved for a mortgage.
Not to mention debt collectors can add expensive fees, which increase the amount of money you owe—putting you into a vicious cycle of continuously paying off your student loans for 10, 20, or even 30+ years later.
#5: Not Buying Insurance
Think of insurance as a financial safety net that helps you when accidents or something bad occurs. For example, if your car accidentally hits a dear, you might have to pay 10,000 or more to repair it.
Sometimes your car can be so damaged that it’s beyond repair, and you will have to pay 15,000 to 65,000 to replace it.
Getting insurance prevents you from having to pay that much. Your insurance will help pay for the cost associated with the repair so that you don’t have to pocket the whole bill by yourself.
#6: Having More House Than You Can Afford
Buying a home can be one of the best decisions you’ll ever make, but it can also be the worst. So ask yourself: “Does buying this house make sense financially?”
One of the biggest mistakes you can make when buying a home is taking on so much debt that you can barely afford the necessities in life.
When buying a home, you must consider the closing cost, property taxes, repairs, maintenance, and insurance fees.
If you’re not buying the home outright, you need to consider how much money you can put down as a down payment.
The more you can put down, the smaller your monthly mortgage payments will be overall. However, if you cannot put at least 20% down, you’ll also need to budget for mortgage insurance.
Worst case scenario, your inability to keep up with your mortgage payments could cause you to get evicted, and the bank will have ownership over your home.
That’s why you don’t want to buy more houses than you can afford.
#7: Spending Too Much Money On Children
Kids can make even the most conservative spenders have loose wallets. That’s because you want to give them the entire world and make them happy.
However, overspending is not good for anyone, even your own kids.
A survey conducted by Credit Karma found that of 1,000 parents they interviewed, 53% spent money they didn’t have to pay for non-essential items for their kids.
That means they took out loans, used credit cards, or borrowed money from someone else to buy their kids the latest toy or gadget. This might be okay to do once or twice a year.
However, being careless can get you into serious debt, especially if you don’t have good money management skills.
Going into debt can hurt your credit score. A bad credit score can end up hurting your family when it comes time to buy a home or move into a nicer apartment.
Not to mention, research shows that spoiling your kids can have long-term harmful effects. They may grow up to be very needy, dependent, and unable to solve their problems as adults.
In fact, psychiatrists are now saying that overindulging your kids is a form of child neglect. So overspending is bad for your wallet and can also hurt your child in the long run.