There are a lot of individuals who cause significant damage to their financial lives during their younger years. By the time they realize what has happened, the damage can be extensive. The reasons for this vary widely. Some individuals are aware of what is happening but assume they can simply pay off their debts at a later date. Others believe they will have a lot more money in the future. The unfortunate truth is the older you are, the hard it will be to turn around your financial life.
The bad financial decisions so many individuals have made are shared in this article in the hopes of preventing other people from making the same mistakes. The good news is even if you are above the age of thirty and making any of these errors, you still have enough time to turn everything around. You can secure your financial future by living a more frugal lifestyle.
Home Sweet Home Can Be a Bitter Place to Live
1) You should have an emergency fund prior to purchasing your first home. It can feel like the moment you own a home, you are suddenly being tested. If you do not have enough money in your savings account, something big will inevitably go wrong such as your roof or HVAC system. This will cause you to instantly grab your credit cards to pay for the repairs or replacement.
2) Another mistake is basing a long-term lease on what you believe your income will be once you are a college graduate. Be patient and wait until you have secured your first job before you sign either a mortgage or a lease for your own home. An even better option is waiting for six months to be certain the payment will be affordable for your income level. If you choose not to wait, you may be poor from the moment you move into your new home.
3) Never stretch your finances to purchase a new home because you believe you are making a good investment. This type of thinking is common for the younger generations but needs to be completely eradicated. Although there is the potential for any home to increase in value, a house is no different from any other investment. The value of the property can also decrease. The issue is when you do not have enough money to maintain your home, you are literally risking the roof over your head.
4) Sharing a mortgage with a girlfriend or boyfriend is a bad idea. Although there is nothing wrong with deciding to share a home with your significant other prior to getting married, do not share either a lease or a mortgage with them. Unfortunately, there is a good chance the relationship will not work out for the long-term. If you break up, the financial ramifications from having joint ownership can be extremely messy.
5) Do not put a lot of money down on your new mortgage because your new home can decrease in value. If you have financed 100 percent of your home and your home loses value, you will be left with no breathing room. Purchasing a home is expensive. Put down between ten and twenty percent so you have some breathing room. To eliminate the need for private mortgage insurance. put down as close to twenty percent as you can.
Being at the Mercy of the Lender
6) Do not cosign a vehicle loan for your dearest friend or borrow money to purchase a car. Once you have cosigned, if the individual defaults on their loan you are liable. The fact they require a cosigner means they will probably be unable to pay off the loan.
7) Do not sign up for any type of credit card because they are offering you a free gift. With the money you will be spending on the interest, you could have easily purchased whatever you received with plenty of money left over.
8) Borrowing money from your parents is a mistake. This will change your relationship. You will also have difficulty declaring your financial independence if you are always asking your parents for money.
9) Do not pay off one credit card using another without canceling one of them. Transferring your balance to decrease your interest rate is a good idea unless you do not cancel your old credit card. Leaving both accounts open means your debt will most likely double in the future.
10) Paying your bills late will incur late fees. Consistent late payments on a credit card will have a negative impact on your credit score. This is especially true if you are more than thirty days late. If you are more than sixty days late, the chances are good your interest rate will increase. Once you damage your credit, securing a loan at a low-interest rate in the future becomes extremely difficult.
The Most Common College Mistakes
11) Student loans are usually necessary for attending college. Choose a profession that can support your student loan debt. You do not want your loans to be three times more than your yearly salary. Do not borrow $100 thousand with a salary of thirty thousand. You can easily be left with more in student loans than you will comfortably be able to pay.
12) You may find it amusing to use Twitter and Facebook to demolish your enemies. Your future employer will most likely not be amused. Everything you do on the internet can be seen later on and used against you.
13) You may increase your number of followers on Twitter and Facebook by posting a picture of yourself partying half-naked on the beach. You must once again think about your future employer before acting on this impulse.
14) Choosing your college should not be based on their football team. You should base your decision on your scholarship opportunities and the specific courses offered by the college.
15) If the only reason you want to attend college is to get a degree, you are wasting your time. You must learn something you can use in the real world.
Making the Decision to Marry
16) Do not get married for the wrong reasons. The individual you choose to marry will help determine your financial failure or success. Opposites may attract but the marriage may not be solid. You spouse needs to have the same dreams for the most important aspects of your life.
17) No engagement ring is worth six months of your salary. If an expensive ring is necessary to impress someone, you may be marrying the wrong person. You should limit your spending to one month of your salary and pay in cash.
18) Avoid spending thousands on your wedding. Your marriage will be off to a much better start if you are both debt-free. Do not place yourselves or your parents deeply into debt for your wedding.
19) Do not accept the debt of your partner. Marriage means the debts of your spouse become yours. Make certain you are clear when talking to your partner about marriage and dept.
20) Divorce is incredibly expensive. If you are having problems, fight for your marriage instead of just giving up. Once you divorce, your former spouse will receive fifty percent of your assets. Depending on your age at the time, you may have completely derailed your financial future.
Always Work to Live as Opposed to Living to Work
21) If you are offered a well-paying job right out of high school, accept the position. This will eliminate paying off college loans and may be an excellent opportunity for the future.
22) If you want to be an entrepreneur and begin your own business, wait until you have enough money to pay for your business with cash.
23) Forming a partnership with your old fraternity brothers will not always be successful. The best option is for the individual with the most money to start the business then hire the others. If the business does not succeed, your friendship will still be intact.
24) Always negotiate prior to accepting your first job opportunity. There is usually room for negotiating your salary, paid days off, schedule flexibility, etc. You will not be offered more if you do not ask.
25) One of the most common mistakes is spending a couple thousand on a new corporate wardrobe before you get paid. Purchase a couple of outfits for job interviews and your first day at work. Wear what you have until you have enough money to pay cash for a few new outfits. Purchasing a new outfit here and there will eventually complete your ideal wardrobe.
26) Your salary is the most important aspect of your financial future. The biggest mistake you can make is being labeled as a bad employee. This can occur for many reasons including being dishonest, immature, lazy or unpleasant. If you are unpopular with the individuals you work with, you will not receive promotions, raises, help to advance your career or rewarding work. You may not receive any support or be given negative references. No upward progress or frequent job changes may make potential employers unwilling to hire you.
The Truth About Your Car
27) If you are unable to afford the payments or pay in cash, do not purchase the car. The reason dealerships advertise monthly payments as opposed to the actual price is because it is far more appealing. Watch out for loans that end with a balloon payment.
28) The cost of not following the rules of the road is high. Once you have received a lot of traffic tickets, the cost of your insurance is going to be expensive. Speeding also increases the cost of your gas mileage.
29) Refusing to purchase a used car because you believe you will be getting someone else’s issues is a mistake. This is nothing more than an old cliche. When you purchase a new car, the second you drive off the lot your car is considered used anyway. Properly maintaining a used car will save you thousands as opposed to purchasing a new vehicle.
30) Purchasing a new vehicle is because the gas mileage is better is not smart. Even though the prices for gas are consistently increasing, this is not a good excuse to finance a new vehicle. You would have to drive for several thousand miles just to break even. If you are already planning to purchase another car, do so for the better gas mileage, for your wallet or because you want to help the environment.
31) Reputable insurance companies will all offer you about the same rate. Instead of wasting your time calling numerous companies looking for a better rate or accepting a lower rate from a questionable company, take the first offer you receive.
The Negative Impact of Excessive Shopping
32) Purchasing clothing with labels to impress the people in your life is what you probably did in high school. Do not make the same mistake as an adult.
33) Following the latest trends is one thing. Attempting to keep up with them is another. Trends generally go out of fashion quickly leading to buyer’s remorse. A good example is remaining current with the newest technology. This road may lead you to financial ruin.
34) There are a lot of benefits to eating out such as social interaction, no clean-up and no cooking. If you eat out too frequently, you will eventually drain your wallet. If you never learned how to cook, take a couple of cooking classes instead.
35) A television that takes up eighty percent of your living room’s square footage is unnecessary. Certain flat screen televisions are more expensive than purchasing a car. If you own a mansion with an enormous living room, purchase the television. Otherwise, check Amazon for a much more affordable option. You may even find a coupon code to save you even more.
36) In addition to the health implications, smoking is an extremely expensive habit. Depending on your location, smoking just one pack per day can cost between $150 to $350 every single month. Smoking increases the cost for your dental care, dry cleaning and insurance. The resale value for your vehicle will also decrease. Not only will you see instant savings when you quit, but you may also prevent serious health consequences for your future.
37) Creating a personal budget will enable you to determine where you are spending your money. If you are afraid of budgeting your money, you need to get past your fear quickly or you may be undermining your financial future.
The Beautiful Expenses of Having Children
38) Getting out of debt once you have children in much more difficult. You should be free of debt before you have a family if at all possible. This does not mean you should not have children if your debts are fairly low and manageable as opposed to being excessive.
39) If you agree to pay the expenses for your children once they have become adults, you have just guaranteed your children are never going to grow up.
40) Do not wait until your children have reached the age of sixteen to begin saving for their college education. As soon as your children are born, you have to start considering the costs of inflation and tuition. Your best option is setting up a college account while your children are still young. This will enable you to save the necessary funds.
41) Your five-year-old child does need their own cell phone. Once your child is old enough to participate in activities where they are away from home such as sporting events or sleep-overs, you can purchase them a cell phone so you can contact one another. A small child will require parental controls so strong, they will not be able to do much with a cell phone anyway.
The Importance of Your Financial Future
42) Trading single stocks by establishing an online brokerage account prior to funding your 401k is a mistake. This is not a good way to make a lot of money quickly. You need to be properly diversified before you consider opening a brokerage account even if you believe you can make thousands fast. If you have not prioritized correctly, this may stop you from adding to your retirement account.
43) Do not pass on opening a Roth IRA. Opening this account while you are young is one of the best possible retirement strategies. Even though should not touch this money until you turn 59 and one-half, your funds will be tax-free. If there is a crisis, you can pay the penalty and tax fees to withdraw your money.
44) All of your additional funds should not be placed into company stock. Yes, you can accomplish this through an online brokerage account and a plan for purchasing employee stock. The problem is even the slightest change can cost you thousands on a regular basis. Not only will this make planning for your financial future extremely difficult but living this way will be harder than you can imagine.
45) Infomercials late at night generally offer poor investment advice. The temptation for picking up additional money each month by stuffing envelopes, selling one of the latest trends or flipping houses is very real. The issue is there are thousands of scams for each legitimate opportunity.
46) You should be extremely cautious before even considering borrowing funds from any kind of retirement account. The compound growth your retirement account is earning will be lost immediately. Find another option for decreasing your overall expenses. Try a credit counseling program, tighten your budget, open negotiations with your creditors or consolidate your debts with a personal loan.
The Perils of a Criminal Record
47) A criminal record has serious consequences. You may be disqualified from receiving financial aid, being admitted to college, obtaining a loan or receiving the security clearance necessary for numerous jobs. Even if you were young when you broke the law, the consequences can follow you for years. You may be unable to work in certain industries. Your best possible option is to stay out of trouble. If you made a mistake resulting in a criminal record, you can still turn your financial future around.
You must accept the consequences of your actions. This means remaining honest, not attempting to conceal your criminal record, understanding numerous rejections will be inevitable and taking every step you can to show when given the opportunity, you will be a trustworthy and conscientious employee.
Health Insurance is Important When you are Young
48) You need some type of health insurance. When you are in your twenties, consider catastrophic insurance at the very least. Being young does not mean you will not become ill or be involved in an accident. This is not a risk worth taking. Secure a plan with a high deductible or establish a health savings account in case there is a major illness.
49) Just because you do not have any dependents is no reason to forego cheap life insurance. Even if there is nobody who needs your income once you pass away, money will be required for settling your final expenses. This burden should not fall on your close friends or parents because you did not pay a small premium for life insurance.
50) Finding disability insurance when you are in your twenties is important. Accidents and illness can happen when you are young. If you should become disabled, disability insurance will protect both your salary and your financial future.
51) Not visiting a physician is a common mistake. At the very least, you should have a check-up semi-annually or annually. Taking advantage of preventative medicine can not only extend your life but you can save money as well.
The Bottom Line
The above are 51 different ways you can destroy your financial future. Most of these issues can be avoided while you are experiencing life. You financial future is dependent on your financial maturity and discipline. Maturity can occur at any age but there is a definite advantage to finding it earlier. Once you have secured your financial independence, your future opportunities are nearly limitless.