You might think you have full control of your finances, but there might be scary things you're doing with your money. Good money management often comes by trial and error. Many of us make a lot of mistakes during our young adult years, and we learn from these mistakes. Unfortunately, bad decisions can result in financial disaster. Therefore, we need to recognize good and smart moves for our money. Here are seven incredibly scary things you're doing with your money.
1. Carrying a Credit Card Balance
Carrying a credit card balance from month to month is probably one of the scariest things you're doing with your money. This might not seem like a big deal, but the more you owe on credit cards, the more interest you'll pay. And if your balances are high, your credit score can suffer and it might become difficult to qualify for loans.
2. Cosigning a Loan or Credit Card
With a credit score in the 700 or 800 range, friends and relatives might ask you to cosign a loan or credit card. You might be tempted to say yes and help a loved one get ahead financially. But at the end of the day, you're putting your own good credit at risk. Cosigning a loan is a major deal and on paper, you're just as responsible for the debt. If the other person defaults or stops paying, your credit score can drop.
3. Auto Title Loans
If you don't have any other options for financing (and you desperately need a loan), an auto title loan might be attractive. And if you understand how these loans work and use them responsibly, you can avoid complicating your personal finances. But with an auto title loan, there's always the risk that you'll lose your vehicle and pay a high interest rate. These loans use a paid off car as collateral. So, if you can't repay the loan, the title loan company takes your vehicle.
The truth of the matter is, you're probably never going to hit the big jackpot. And if you're spending money each week or each month trying to change your life financially speaking, you're only fooling yourself. Besides, something as simple as buying a lottery ticket on a regular basis can escalate into a bigger problem. Spending money to make money works in business, but this mantra rarely applies to gambling.
5. No Budget or Spending Plan
If you hate messing with numbers, you might ignore the importance of creating a budget or spending plan. Some people go with the flow and they never have a plan for their money. But this approach increases the risk of overspending. On the other hand, a monthly budget keeps your spending on track and you'll always know where your money goes.
6. Putting off Saving for Retirement
Looking ahead, you may feel that you have a lifetime to prepare for retirement. However, the years creep up fast. And if you don't start planning early, you might have to delay retiring and work longer than anticipated to secure your financial future. It doesn't matter if you're in your early 20s, speak with your employer about starting a 401(k) plan, or open an individual retirement account with your bank.
7. Paying Bills Late
No good comes from paying bills late, unless you like getting hit with late fees and potentially damaging your credit score. When you apply for a loan, such as a mortgage or an auto loan, the creditor will review your payment record. And if you have a history of paying late, this bad habit can ruin your chances of getting financing.
You may not be an expert money manager, but if you learn how to recognize habits that can hurt your finances, you'll have the power to improve your situation. What other terrible things do we do with our money?