With so many demands straining your budget, you can’t afford to leave money on the table. Unfortunately, however, life’s hectic pace sometimes challenges your ability to adequately monitor household money matters, leading to monetary missteps and occasionally allowing important financial concerns to fall between the cracks. If your financial flow is suffering or if there are important financial decisions looming on the horizon, consider some of the following costly money mistakes people make – avoiding them at all costs.
Costly Money Mistake #1: Buying Too Much House
First time home buyers and even experienced home owners, versed in real estate matters, often succumb to the lure of buying a big expensive residential property. For shoppers of means, buying “too much” house has lasting consequences, raising spending obligations in related areas, such as insurance, taxes, and mortgage payments and utilities. But outcomes can be even worse for those stretching modest means to acquire property they cannot afford.
Relatively recent events in the mortgage industry illustrate some of the potential problems associated with overbuying. From a mortgage standpoint, high loan to value scenarios present inherent risk, increasing the chance you’ll run into future inconsistencies. In other words, like a credit card, maxing out mortgage financing can leave you vulnerable under certain circumstances. Countless families learned lessons the hard way, following a major market downturn beginning around 2008. As properties lost value, many high-balance mortgage customers found themselves underwater, owing more on their principal loan balances than their homes were worth.
For the best results sidestepping this common mistake, establish financing limits well ahead of time, setting up your funding even before looking at homes.
Costly Money Mistake #2: Living Beyond Your Means
An expensive home and unmanageable mortgage are only costly money mistakes. Overspending, or living beyond your means, ignores the necessary balance required to keep your personal finances viable. Saddled with spending in excess of your earnings, there is only one way to equalize your balance sheet – borrow money. If you face shortfalls once in a while, but quickly recover during subsequent billing cycles, you may be experiencing the natural ebb and flow of healthy cash flow. Recurring difficulties making ends meet, on the other hand, often indicates a larger problem, calling for corrective action.
In order to evaluate your financial health, you must first track your spending and income. If your budget is balanced, monthly expenses are covered, with money left over to address long-range financial goals. Living outside your means, on the other hand, results in major budget shortfalls that you must borrow to overcome. Once entrenched, the cycle is hard to break, leading to unmanageable debt and compounding mistakes you cannot afford to make.
Costly Money Mistake #3: Stalling Retirement Planning
It is hard enough to account for today’s pressing financial concerns, but effective money managers must also lay the groundwork for future financial needs. Too often, retirement planning takes a back seat to daily money matters, leaving would-be retirees with insufficient resources.
Nothing substitutes for professional advice, so no matter what financial stage you’ve reached, it pays to consult with expert advisors. Using our age, income, and expected spending requirements, specialists are prepared to assemble custom retirement plans – even helping you catch up on your savings schedule.
For the best retirement outcomes, account for your retirement savings and investments, apart from other spending demands. To stay on pace, set goals and adjust your plan along the way, realigning your approach as needed.
Finally, for more costly money mistakes you’ll want to avoid, check out this video by Suze Orman. She’s a personal favorite and generally has good things to say.
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