Mistakes are made with money everyday by everyone when it comes to personal finances basics. Some of the most wealth people in the world make mistakes, people in the middle class make mistakes and the poorest people in the world make money mistakes. It is an almost unavoidable issue. The more poor you are, the more those mistakes can hurt you. What are the biggest money mistakes people make? Read on to learn more why this happens.
1. Neglecting Your Credit Scores
These three-digit numbers are more important today than ever, especially today with all kinds of people defaulting on their debts. Banks that lend money are incredibly cautious about to whom they will lend money.
Banks are looking for low-risk customers. If your credit rating is at 750 or higher, lenders will do almost anything for your business. A high credit rating also means you will get great rates on home mortgages, car loans, personal loans and credit cards. Insurance company’s and landlords also use credit scores to determine potential applicants, that’s why it is crucial to maintain your credit.
Do you know your credit? There are all kinds of resources that can show you. They will help with your personal finances basics.
2. Carrying Credit Card Debt
If you carry a balance on your credit card not only are you paying exorbitant interest rates but you also ruining your opportunity to get a mortgage or some other kind of loan and you are lowering your credit score. If you want to fix your personal finances you need to eliminate your credit card debt. If you need help in eliminating your credit card debt get it.. You won’t have any leverage with lenders if your credit is in poor shape. The sooner you eliminate your credit cards the less likely you will ruin your rating.
3. Too Much Home or Auto Debt
You should not exceed thirty percent of your gross income when it comes to how much you are paying for your mortgage. On that same line of thinking, how much you pay in transportation expenses should never be greater than ten percent of your income (that includes insurance, gas and repairs). If you are paying more in one or both of those categories, you are in over your head with regards to home or auto debt.
What to do? It may be time to rethink where you are living. If you are unable to afford a home or apartment with a thirty year fixed rate mortgage, you can’t afford to live there. If you are unable to pay the 60 month loan for a vehicle, you should be driving that car. Those are simple personal finance basics you must 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 more and more valuable with each passing day. You should have an emergency fund. That fund can assist with paying for unexpected expenses like as car repairs and it will even cover any bills if you lose your job. Most people aim to create an amount that is equal to three months living expenses. If you have a family it is wise to be able to cover six months. Clearly the more you can afford, the better. If you don’t have an emergency fund, you should start creating one. A way to get started is to have a goal of creating an amount of $1,000 and then go from there.
You don’t have to make mistakes but everyone does. The fewer mistakes you make the better off you will be. If you are able to avoid these 4 crucial errors, you can begin enjoying the financial freedom you deserve. Trying to live within your means, staying on top of your debts and your credit are the personal finance basics we should all take care of.