When it comes to your money, don’t make these 8 money mistakes.
Here’s what you need to know and what to do instead.
1. Not creating an emergency fund
An emergency fund is the safety net that you need in place before disaster strikes. At a minimum, you should save 6-9 months (preferably longer) of cash in a separate bank account to cover necessary expenses in case you unexpectedly lose your job, get sick or have other unforeseen expenses.
2. Making a late payment
Each month, your goal should be to make on-time payments in full. Otherwise, you could face penalties and an adverse impact to your credit score. To avoid late payments, enroll in auto pay. Auto pay will save time, money and frustration.
3. Skipping a payment
Don’t skip a payment. Whether it’s a student loan, personal loan, credit card, auto loan or mortgage, you have a contractual commitment to repay your debt. When you skip a payment, you’ll be assessed fees and penalties. Missed payments also can hurt your credit score.
4. Defaulting on debt
You don’t want to default on your debt. Before you borrow, understand the interest rate, monthly payment and loan terms. If you don’t think you can make the monthly payments, don’t borrow the debt.
5. Buying a house than you cannot afford
A house is a place to build memories. However, don’t think of your house as an asset that will automatically appreciate in value. Maybe it will; maybe it won’t. If you find your dream home, make sure you can afford the mortgage payments. Separate the beauty from the cost of the house – they are two different things. One is for you to enjoy; the other you need to pay for.
6. Not refinancing student loans
Student loan refinancing lets you combine your existing federal student loans, private student loans or both into a new, single student loan with a lower interest rate. To maximize your chances of approval, you can apply to multiple lenders at once, and even check your new interest rate online in two minutes without any impact to your credit score.
This free student loan refinancing calculator can show you how much you can save.
7. Borrowing against your IRA
Don’t make an early withdrawal from your IRA. If you do, you could face a penalty as well as taxes. Likewise, borrowing against your retirement account is also risky, even if you receive a low interest rate. There’s always a chance you can’t pay back the loan. So, save your retirement account for retirement.
8. Not consolidating credit card debt with a personal loan
Credit cards can be great financial tools. If you have credit card debt, however, the interest rate can be 10-20% or higher. One option is to consolidate your credit card debt with a personal loan. A personal loan is unsecured credit that is typically repaid within 3-7 years. If you can obtain a lower interest rate with a personal loan compared to your credit card interest rate, a personal loan can be a great financial move to save money.
You can use this free personal loan calculator to determine how much you could save on your monthly payments.
