It’s that time of year – when houses are lined with ghosts and goblins, and horror movie screenings appear all over town. And if the thought of a barrage of costumed kids knocking on your door asking for candy scares you a bit, well, you’re probably not alone.
But as scary as this time of year can be, there is nothing scarier than ruining your personal finances by making a few critical mistakes. Here are some blunders you might end up regretting for years to come.
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1. Do not set up an emergency fund
Generally, it’s important to have three to six months of living expenses in a savings account. That way, you’ll have cash reserves to tap into if you lose your job, run into a pile of medical bills, or suffer from an expensive home or car repair.
But if you don’t build up an emergency fund, you may be forced to rack up expensive debt that will hang around with you for years to come. Even if you end up borrowing money through a personal loan (which won’t hurt your credit score if you make your payments on time), you will still have to deal with the mental load that comes with having debt. And that alone could have a negative impact on you.
2. Accumulate avoidable high-interest debt
Some people run into expensive credit card debt because life circumstances are not in their favor. If you happen to lose your job and have major repairs to your home at the same time, you may have no choice but to charge expenses to a credit card and pay your balance back to the bank. over time, even with a strong emergency fund.
But some people go into credit card debt because they don’t watch their spending or because they typically give in to indulgences and impulse buying. It is this situation that you could deplore for a long time. Not only can credit card debt cost you a lot of money in interest, too high a balance can hurt your credit rating, making it harder to borrow money when you need it.
A good way to avoid credit card debt is to stick to a monthly budget. Also, take steps to avoid impulse buying when you can. Don’t store your credit card details on your phone or laptop, making it harder to buy things on a whim.
3. Pass the chance to refinance your mortgage
If you own a home, refinancing your mortgage could make your monthly payments more affordable. And the less you spend on housing each month, the more money you’ll free up to build emergency savings and cover your bills so you don’t have to run into credit card debt. If you’re having trouble paying for your home, it’s even more important to consider refinancing.
Typically, refinancing makes sense when you can reduce the interest rate on your current mortgage by around 1% or more – and when you intend to stay in your home long enough to recoup your closing costs. . If you can tick both items off your list then it is worth shopping around for several refinance lenders to see what rates they are offering you. Comparing your choices is a good way to get the best deal on your new home loan.
We all make mistakes in life, including those about money. Avoid these mistakes to bypass the frightening consequences that could ensue.