Living with debt has become a prevalent lifestyle for many Americans. While not ideal, most people can manage to keep their debt in check and still stay afloat financially. However, there are some who cannot and they end up declaring bankruptcy and having to deal with the problems that come from that. What is the difference between those who can manage their debt and those who can’t? Take a look at these costly mistakes and see if they are things that you are doing.
Misusing Credit Cards
One of the easiest ways to fall into debt that can spiral out of control is to get into the habit of using credit cards to buy things that you can’t quite afford. Whenever you spend more money than you make – especially when you do this on a weekly basis for months and years at a time – you’re just asking for trouble. If you can discipline yourself to live within your means and pay off your credit cards every month, your financial future will start looking a lot more secure. At times you may need to use your credit card for something important that you can’t quite afford yet. This is perfectly okay, but only if you haven’t been using it for trivial debt. It’s the trivial debt that is going to get you in trouble.
Getting a Bad Mortgage
Owning a home is a part of the American dream, and in many cases, home ownership can be a smart investment. But in recent years, many Americans ended up in serious financial trouble because they took on mortgage payments that they weren’t able to keep up with. Be willing to settle for something that fits what you need but is less than what you want in order to be able to afford your mortgage payments. You should also make sure that you find a mortgage that has a fixed low-interest rate, so you aren’t paying a ton of extra money.
Not Saving Enough Money
One of the best financial habits you can develop is that of saving a little bit of every paycheck in an emergency savings account. Not only will this help you be a little more frugal in your spending, it will also help you prepare for the future. You never know when you are suddenly going to encounter a major expense that you didn’t plan for, and having emergency savings to deal with this is important. If you can pay for part of your emergency with your savings instead of having to go into debt for all of it, you will be in a much better position.
Putting All Your Eggs in One Basket
If you decide to invest your money and you put it all in one spot, then you might end up in trouble. Some investments are a little more secure than others, but putting all of your money into one investment can be a very bad idea. Not only will this not have nearly as large of a return as a diverse portfolio, but you also run the risk of losing everything if the investment doesn’t work out. Talk to a financial advisor about the different ways that you can invest your money and get the greatest return for the least amount of risk.
Debt doesn’t have to lead to bankruptcy. It is possible to control it and get ahead enough to eventually get out of debt. Make sure you use your money wisely and that you don’t overspend on things that aren’t important.
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