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the most common financial mistakes

Numerous people in the United States find themselves struggling with debt on a daily basis. Along with debt, many households have been suffering from decreased savings rates. With the recent recession, homes that have struggled with these problems have suddenly become even more hard pressed to make their financial ends meet. In order to improve financial quality of life, it is important for individuals, families, and households to avoid some of the most common and damaging financial mistakes.

#1: Unnecessary and Excessive Spending

Significant savings are only acquired one dollar at a time. The same is true for losing money. Although buying a couple things here and there might not seem to have much significance, it can make a big impact over time. Some of the biggest unnecessary expenditures occur when people buy inexpensive items without thinking about the consequences. Even just spending an unnecessary $10 per week adds up to $520 a year that could be spent paying off loans or a mortgage. Each dollar counts particularly when you are one of those many families that find yourself living paycheck to paycheck on a regular basis.

#2: Living off of Credit Cards

Although it has become commonplace for everyday goods to be paid for with credit cards, it is shocking how many individuals are paying exorbitant interest rates on necessities such as gasoline and groceries. All too often, they find themselves without the paid for items long before they have managed to pay off the entire bill for said items. Keep in mind that, when you are using a credit card, you end up paying more for the item than it is actually worth when you take credit card interest rates into consideration. Credit cards have also caused the ubiquitous problem that many people have of spending more than they earn.

#3 : Continuous Payments

Items such as cable television, cell phones, pagers, magazine subscriptions, etc. drain money from your account on a regular basis, whether monthly or yearly. If you find yourself in dire financial straits, it may be time for you to consider whether these payments are for things that you actually need. Cutting out even just one of these items can add significantly to potential savings.

#4 : Spending Too Much on a Home

So many people make the mistake of buying a house outside of their price range so as to acquire a larger home. Oftentimes, these individuals or families do not even require such a large house. Unless there are several persons living within the home, a large house is not necessary and can add unnecessary expenses such as higher utility bills, maintenance costs, and taxes along with initial cost.

#5 : Purchasing a New Vehicle

Of the millions of brand new vehicles that are bought each year, only a handful of said buyers are able to successfully purchase the car in cash. Essentially, this means that the rest of the car buyers cannot afford the car that they are purchasing. Even if the are able to afford the car payments on a monthly basis, the fact is that the car itself was unaffordable. Once acquiring a loan for the car, the purchaser is then required not only to pay back the borrowed amount but also the accompanying interest. The difference between the value of the vehicle and its cost to the consumer is astronomical when you take into consideration that high interest rates are being paid on an asset that continuously diminishes in worth. To make the matter worse, many people trade in their cars between two to three years after purchase, losing even more money.

Cars are one of the most expensive household assets. Because of this, it is important to buy a car that fits your needs and does not exceed them. For example, if you are a single individual, there is no need to buy a large SUV that costs more to purchase, requires more fuel, and costs more to insure. Gas prices continue to be quite high so, when purchasing a vehicle, choosing one that is more fuel efficient is a must.

#6 : Living in a Paycheck to Paycheck Manner

The United States is currently seeing a great decline in the amount that the average person is saving. As of the year 2007, surveys showed that the savings rate of the American household fell below 1% with other countries, such as Germany and France, showing significantly higher savings rates.

The fact is that Americans tend to be overspenders, using up almost their entire paycheck and waiting impatiently for the next. This puts families in the horrible position of being without money if a paycheck were to be missed. This is particularly hazardous during a time of recession when many people have found themselves without a job. Savings need to become more of a priority.

#7 : Spending Home Equity

When in need of cash, many individuals and households turn to refinancing their home and taking out cash. Essentially, this gives away your home to another and can also cost thousands in fees and interest. The smart homeowner will strive to acquire equity instead of making continuous payments. In the long run, individuals who take advantage of their home equity as their private spending cache will wind up paying significantly more for their home, often much more than the house is worth. This is an ugly truth that becomes incredibly apparent if the family chooses to sell.

Be sure to keep these in the back of year head to avoid any unpleasant situations. If you want some more background info, you can also check out the following webpages I used making this website