Categorized | Financial

Top 5 Financial Pitfalls and How to Avoid Them

Let’s face it, in the financial world there are dozens of pitfalls we are trying to avoid in order to stay swimming with our heads above the water. That being said, what are some pitfalls and how can we avoid them? First, a pitfall many people fall into is relying on their credit cards. Credit cards offer a line of credit so individuals can make purchases now and pay later. Many people don’t think and buy tons of stuff, then realize they are in debt up to their ears and have no way to pay it off.

A great way to avoid getting into trouble with credit cards is to limit how many you have. Perhaps only have one or two credit cards. Another great tip is to treat it as if it were a debit card. Don’t use the credit card unless you have the funds. Make sure you pay off the balance each and every month so you don’t get hit with high interest rates. Second, a pitfall many people fall into is not saving for retirement. Let’s face it, life isn’t cheap and it costs a decent amount to simply live.

If you don’t start saving for retirement now you will be in trouble. A way to avoid this is to put away money each month into a savings account that you don’t touch. Also see what your employer has in regards to retirement funds. A lot of the time employers will match your 401k contribution to a certain amount so take advantage of that! Third, a pitfall many people fall into is being hit with fees from the bank. Lately banks have risen their fee rates and have stiffened their requirements for different accounts. In order to not get hit with an unnecessary fee, make sure you understand the requirements for your specific accounts. Usually this is a minimum balance, so make sure your account always has at least that much in it.

Also only use ATMs that don’t charge you a fee either. Fourth, a pitfall many people fall into is not having a monthly budget. As someone who loves budgeting I don’t get this. Many people just spend and don’t really take too much thought as to where the money is coming from to pay for everything. In order to avoid this, sit down and create a detailed monthly budget. Indicate how much income you receive, and then what your monthly expenses are. Then allocate the remainder of the money into miscellaneous, fun/dates and savings. Although my husband and I don’t make that much money, just from budgeting we have saved hundreds of dollars each month since we’ve been married.

Fifth, a pitfall many people fall into is missing the due date on bill payments. Once you miss a payment you are instantly hit with a late payment fee and sometimes your interest rate increases as well. In order to avoid this pitfall, set up a system to help you remember when things are due. I have written due dates on my budget that I frequently look at. Also you could set up reminders on your phone, or even automatic payments. If you find you need professional assistance with finances, look no further than Kirkpatrick & Associates.

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