Actually the following list of expensive financial mistakes applies to older people as well, but we’re targeting the younger generation in the hopes someone out there will take the knowledge to heart and not be forced to learn this particular wisdom the hard way. The current recession has delivered a huge WTF wake up call to an entire generation of recent college graduates who never thought money would disappear from their bank account and pile upon their credit card at such an appalling rate.
Here are a few particular financial mistakes to watch for.
1. Don’t neglect an emergency fund. Yes, the boring old emergency fund that can save your financial rear end when things like medical expenses, car repairs, or broken windows appear in your life. Though the timing and extent of emergencies never reveal themselves in advance, one constant is that they will happen. We recommend you first establish a $1,000 “baby” fund, while working on building a full three month reserve. Using this to deal with contingencies is always better than using high interest credit.
2. Beware the slow leak. Do you use your debit card for the daily soft drink, Starbucks, or bottled water? These nicks and cuts to your balance can surprise you at the end of the month, leaving you paying close to $30 for that latte, once overdraft fees are figured in. Set yourself a drink budget and pull out the cash. When it’s gone, it’s gone.
3. The non-existent budget. It surprises us to discover that some people have absolutely no budget at all for – for anything – and are still surprised when they run out of money halfway through the month.
4. Credit disaster. Paying only the minimum on your credit card each month is a financial black hole. The high interest charges end up costing you much more than the actual purchase price of whatever you used plastic to pay for. A credit card should only be used for actual emergencies, and the balance paid off, in full, each month. If you’re in a bad way and can’t do that, pay as much as possible until the debt is gone.
If you recognize yourself committing any or all of these financial mistakes, we have a bit of direct advice for you – stop. The good (and bad) news is that it’s as simple as changing your habits.
The Young Wealth Team
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