Most people can admit to at least one terrible money decision in their life. Some of us didn't learn about personal finances as a youngster, so it's only natural to make a few mistakes before learning the ropes. Here are seven signs you're about to make a terrible decision with your money.
1 You Take Advice from the Wrong People
There's nothing wrong with getting financial advice from those in your circle. But you have to be careful. The truth of the matter is, you can't take advice from everyone. It doesn't matter if it's your parent or your best friend, if this person makes horrible choices with his money, this is the last person to give you advice. Talk to those who are financially savvy or work with a financial planner.
2 You Have a Lot to Lose
If you have too much to lose, you shouldn't make this decision. For example, your best friend might ask you to cosign a loan for him or her. On one hand, you want to help. But on the other hand, you're planning on buying your own house in the near future and you don't want to jeopardize the chances of qualifying for your own mortgage.
3 You Haven't Weighed the Consequences
It's important to weigh the consequences of each decision. Making a list is one of the best ways to determine whether it's a good or a bad financial decision. Sometimes, we get so caught up in the excitement of something that we forget to consider the consequences of our actions.
4 Your Choice Can Affect Someone else
If a financial decision can ultimately have a negative impact on someone else, it's probably a bad decision and you should seek alternatives. Maybe you're the one who needs a cosigner to buy a car. Your parents or a sibling might be willing to help, but if you have a history of being irresponsible with your bills, paying the loan late can hurt this person's credit history and drive a rift in the relationship.
5 The Choice Does More Harm than Good
A financial decision may result in something good, but at the same time it can complicate your personal finances and create more problems than you bargained for. For example, maybe you're shopping around for a new car and you find the perfect vehicle, but it's priced outside your price point. A bank may approve your auto loan, but if you have monthly expenses not listed on your credit report, getting the loan might make it difficult to pay your other monthly bills.
6 You're under Pressure
If you make a decision you feel is best for you, but your friends pressure you to make another decision, don't give in. They don't know your financial circumstances – you do. If you allow others to influence how you spend money, you could end up broke, stressed and struggling to make ends meet. Remember, you know your financial situation better than anyone else.
7 You Have a Gut Feeling
Sometimes you have to follow your gut feeling. A decision may look good on paper, but you might have a nagging feeling telling you to walk away. Even if you can't put your finger on why you're having reservations, it's always safer to follow your gut.
A terrible money decision can have long-term consequences and it can take months or years to undo the damage. So, you need to carefully weigh your decisions and do what you feel is best financially. What are other signs that you're making a terrible money decision?
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