Have you ever wondered how responsible people sometimes find themselves filing for bankruptcy? The truth is, a few bad money habits could land anyone in financial turmoil. See below for some of these common habits and be sure to avoid them at all costs.
1. Not having an emergency fund
Emergencies come without warning. Whether the car needs a repair or you have an unexpected medical bill, you need the funds for these unexpected expenses. A good rule of thumb to maintain for your emergency fund is three months of living expenses if you’re a two income family and six months of living expenses for a one income family.
2. Living beyond your means
If you find yourself having to charge most of your monthly expenses, consider reassessing your monthly budget. Don’t turn to credit cards when you’re low on money. Instead, start cutting out some of the non-essentials. Continuing on this path could lead you straight to bankruptcy.
3. Forgetting about your budget
Consider your budget a financial roadmap. Sticking to it helps you reach all of your goals while decreasing or preventing debt. Your budget also helps to prepare for emergencies. A good way to keep within your spending limits is to always shop with a list. If the item is not on the list, don’t buy it.
4. Paying bills late
When you pay late, you’re actually paying more. In addition to paying those late fees, you can damage your credit score. This means that current creditors could raise your interest rates and future creditors could deny you. If you’re having trouble meeting your deadlines each month, it may be time to make some lifestyle changes.
5. Failing to invest in retirement
Though it seems like there is, there isn’t time to procrastinate when it comes to your retirement savings. Don’t assume you’ll be spending less in your retired years. Most retirees take up a few hobbies and begin to travel, and this all costs money. Additionally, the cost of living only goes up.