5 Common personal financial mistakes that you commit

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By: anonymous
on 23rd May,2011

In this materialistic world, often you are prone to overspend.
5 Common personal financial mistakes that you commit


In this materialistic world, often you are prone to overspend. The culture of overspending and the ratchet effect associated with it, lead to higher levels of personal debts and low personal savings rate. However, the worst financial crisis that originated in the third quarter of 2008, since the Great Depression of 1930s, changed the personal financial behavior of the households in the nation.

The Federal Reserve Bank, the banking authority in the United States, has been tracking the household debts in the US since 1952. Since 1952, it has been rising unidirectionally. But in the third quarter of 2008, for the first time, personal debt in the United States declined. This might have emanated from the sub prime mortgage crisis and its adverse impact on the real economy. The majority of the US citizens who became used to the habit of living beyond their means, suddenly found it hard to make their ends meet. Had the citizens in the country been more disciplined in their spending behavior, situation would have been different.

Here are the common financial mistakes you commit often commit, which lead you to tough financial situation.
 
1.    Getting into debt early

It is frequently seen that you pile up huge amount of debt at a very early age. When you are in your twenties, you can gauge the gravity of getting into debt.  So, it is advisable that you should live within your means and gradually build up your net worth for the future. And, if you are already into debt, you should put in honest efforts to clear it off as soon as possible.

2.    Living on borrowed money

It has become a common trend to use unsecured credit cards to purchase essential items. The rate of interest associated with credit card purchases, actually make those essential items more costly. It is recommended that you should check your financial behavior regarding your credit card purchases.  

3.    Purchasing a car which you cannot afford

It is a fashion of the US households to purchase new cars. It is seen that you buy a car but you cannot afford to pay for that purchase in cash. Your inability to pay off the cash amount of the purchase, in turn, in some cases shows your inability to afford the purchase. Again, buying a car with borrowed money implies that you have to repay the principal amount along with the interest amount.

4.    Buying a big house

Regarding owning a house, it may not always be the case that bigger is better. If you purchase a big house, you may have to incur recurring expenses such as utilities, maintenance and taxes. So, before purchasing a house, be cautious and consider all these aspects. If you purchase a big house, you may have to take huge amount of loan. Interest burden of that loan will also be huge.

5.    Waiting too long to invest

Investment is a virtue. It is wise to start investing as early as possible. If you start investing at a very early age, it gives you more time to accumulate your wealth. So, start your humble initiatives to invest as soon as possible. 

Anyways, you are the best judge of your financial position. After rationally evaluating your financial situation, you have to take your own financial decision which will benefit you in the future.

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