Biggest Money Mistakes - Personal Finance Basics
Mistakes are made with money everyday by everyone when it comes to personal finances basics
. The wealthiest people in the world make mistakes, the middle class makes mistakes and the poor make money mistakes. Therein lies the biggest problem. The more poor you are, the more those mistakes can hurt you. What are some of the money mistakes people make? Read on to learn more why this happens.
1. Neglecting Your Credit Scores
Credit scores or ratings are more important nowadays than they have ever been, especially today with all kinds of people defaulting on their debts. Banks that lend money are extremely cautious about giving out loans.
Lenders are looking for low-risk customers. If your credit rating is at 750 or above, lenders will fall all over themselves to get your business. A good credit score also means that they will give your excellent rates on mortgages, vehicle loans, personal loans and credit cards. Insurance company's and possible landlords also use credit ratings to decide on quality applicants, that's why it is important to keep your credit in good shape.
What is your credit? There are all kinds of resources that can show you.They will help with your personal finances basics.
2. Carrying Credit Card Debt
If your credit card has a balance you will end up paying ridiculous interest rates but you may also be affecting your chances to get a mortgage or other type of loan and you are damaging your credit rating. If you want to fix your personal finances you must eliminate any or all credit card debt. You may need help to get rid of your credit card debt. Do so if you feel it is necessary. You won't have any leverage with lenders if your credit is in poor shape. The sooner you eliminate your credit cards the less likely you will ruin your rating.
3. Too Much Home or Auto Debt
In an ideal world you should not exceed 30% of your gross income when it comes to your mortgage. Along the same line of thinking, how much you pay in transportation expenses should not be greater than ten percent of your income (that includes insurance, fuel and maintenance). If you are higher in either or each of those categories, you are paying too much when it comes to home or auto debt.
What to do? You may need to rethink your living arrangements. If you are unable to afford a home or apartment that has a thirty year fixed rate mortgage, you can't afford the house. If you are unable to pay the sixty month loan on your car, you can't afford that vehicle. These are easy personal finance basics you must know.
4. You Tapped Into Your Emergency Fund or You Don't Have an Emergency Fund.
The value to have cash in hand has become more and more valuable every day. An emergency fund is exactly what it sounds like. That fund can assist with paying for unexpected costs such as car repairs and it will even cover any bills if you suddenly become unemployed. Many people try to have an amount that is equal to three months living expenses. If you have a family it is wise to be able to cover six months. Obviously the more, the better. If you don't have an emergency fund, you should start making one. A way to get started is to have a goal of creating a balance of $1,000 and then go from there.
Making mistakes with your finances is often inevitable. The fewer mistakes you make the better off you will be. If you stop making these four crucial mistakes, you will start to enjoy the financial freedom you deserve. Trying to live within your means, keeping up with your debts and your credit are the personal finance basics we should all take care of. If you start to set goals and tackle one item on this list at a time and you will be rewarded financially in very little time at all.
by: Brandon Schmid
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