5 Financial Bad Habits to Avoid
 

When you get over your head financially, it is easy to look for a single event to explain how you got where you are. But, it is not always a catastrophic event that leads to a large amount of debt. Instead, it is often the culmination of several bad financial habits, that all lead to an increase of debt beyond what you can handle. Read over this list of five of the most common mistakes people make to see if you are dealing with any of these financial pitfalls.  
 
1. Not having a budget.  
Many people shy away from having a written budget, thinking they won't stick with it, or that it will keep them from buying what they really want or even need. But a budget just helps you plan how to use your money in the best possible way, while providing for those unexpected expenses. The benefits are enormous when you know exactly where your money is going, and you have a plan you can stick with.  
 
2. Not having an emergency fund.  
Face it--some unexpected disaster will come up at some point in your life. It could be a job loss, a death in the family, a medical emergency, or a month in which everything that can break down, does. If you do not have any extra money socked away, you will be faced with having to tap into your credit cards, sometimes adding large amounts of debt to your current balances. A good rule of thumb is three to six months' living expenses. But even just $1000 put away can head off many unexpected expenses. Start saving about 10% of your take-home pay each month until you have a savings account you can count on.  
 
3. Making the minimum payments on your credit cards.
 
Many people will buy an item on sale, only to end up paying more than the savings in interest when they don't pay off their credit card. Paying only the minimum on your credit cards will extend the time to pay down your debt by years and will increase the amount of interest you pay. Any little bit helps, so consider where you can trim your budget to be able to send more each month. If possible, a part-time job could go a long way toward helping you to become debt free.  
 
4. Overusing your credit cards.  
Sure, some stores will offer you a discount for using their credit card for your purchases. But these cards often come with a very high interest rate. If you don't pay off the card, you will be faced with paying more in interest than you saved by getting a discount. If you are using your credit card to pay for small, everyday type of expenses, be sure to keep track of your spending. Small $10 and $20 purchases can add up, and before you know it, you owe more than you can pay that month, leading to more interest paid. If you are unable to keep track of these small purchases, make it a habit to pay for them with cash or a debit card.  
 
5. Missing payments.  
Paying a bill late is never a good idea. It is not just the late fee that will get you. Some credit card companies will up your interest rate to the maximum it will go. Even worse, you can fall into what is termed "universal default." This means that the interest rates on your other, unrelated credit cards will also shoot upward. Even if you have never been late on that particular card, a company can still raise your interest rate if you've had a late payment with another company. This will all add up to be a lot of interest that you could have avoided and will keep you from paying down your debt in a reasonable amount of time.

 

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