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10 Bad Financial Habits To Avoid In 2016

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by: No more debt !
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Date: Sun, 10 Jan 2016 Time: 5:44 PM

In order to avoid such financial pitfalls and make wise use of that hard-earned cash, outlined below are the ten bad financial habits to avoid in 2016.

1. Automatic Bill Pay 

It is great having an automatic savings system, but setting up an automatic bill pay one is not advisable. This is because you can forget or simply fail to put enough money in your account, something that can result to huge overdraft fees or penalties for returned payments. Automatic paying of bills is also not wise because first it will desensitize you to spending and second, you will hardly notice any charges appearing that don't belong. Instead of opting for automatic payments of your bills, how about setting up alerts to remind you to pay the bill on time? 

2. Not Having Emergency Funds 

Having an emergency fund is one of the smartest financial moves. With the uncertainty of life's direction you might be hit with a job loss or some surprise expense and having the money to cover it will help you avoid getting deeper into financial troubles one of them being, relying on credit cards or simply credit to bail you out. Relying on credit is often times costly thanks to the high interest rates which will definitely lead to more debts. This is why you should have emergency funds that cover at least three months of living expenses if you are a one income family. If you are a two-income family then your emergency funds should cover six months of living expenses. Set aside that small amount every month if you can't afford much, and in the long run it will definitely come in handy. 

3. Failing To Budget 

Without a budget, you are creating a healthy environment for financial disasters. Having a budget will help you avoid getting into debt and build savings instead, which will help a lot in your time of financial need. Build a successful budget by first tracking your income and spending. Have a list of your expenses and stick to the spending plan you have set up. With a good budget in place, you will easily reach your financial goals. 

4. Turning A Blind Eye On Your Credit Report 

It is often times easy to turn a blind eye on your credit report repair which has clear information about your financial habits especially if you know they are not good. Keeping tabs on your credit report is important because it will help you be aware of any fraudulent accounts that are spending money on your behalf. Reading the report can also be sobering and help you realize how financially unhealthy you are, and then spur you to take on measures to improve the situation. 

5. Not Having Insurance Coverage

Insurance is very useful and you will only realize how useful it is, once a natural disaster strikes your home or that unforeseeable medical accident puts you in hospital. Not having adequate insurance coverage might result in you getting into debt, selling your assets or worse, withdrawing from your retirement account to cater for the costs. If you have been putting off insurance coverage, make sure that you get adequate coverage come 2016. 

6. Putting Others First 

If you have been putting others' needs before yours, then you will always lack. Make sure that your finances are secure before thinking of expending your resources on someone else. Never cosign on anyone's loan to avoid paying money you never spent in the first place. Also, never loan out money to others and leave yourself in an unsecure financial situation. As much as it has been drummed throughout your childhood that you shouldn't be selfish, when it comes to finances, you really have to put yourself first to avoid having to depend on others for support. 

7. Keeping Up With The Neighbors

If you like showing off to the neighbors because they show off to you then you are in making a great financial mistake. You don't have to take an auto loan because you saw a new car packed in the neighbor's driveway. Or buy new furniture, or go on a vacation with your whole family just because your neighbors went. Your financial situation isn't the same as your neighbors, while your neighbor might be indulging in such luxuries effortlessly because they can comfortably afford them, you on the other hand might be getting into massive debts just to keep up. This will clearly ruin your financial future and should be avoided at all costs. 

8. Withdrawing Money From Your Own Retirement Account 

If you have the habit of turning to your retirement account when you are down financially then you are risking your retirement future. You will not only pay the 10 percent tax penalty from some accounts, but you will also fail to earn interest from the money in your retirement account. Withdrawing from your retirement account will result to you depending on others after your retirement. 

9. Spending All Your Income 

You might say that you earn little, so that justifies you spending all your income. Nothing justifies spending all your income and if the expenses are too many, how about living within your means and saving up a little for the rainy day? Avoid spending all your money because you will end up having an uncertain financial future. 

10. Late Payments 

Avoid paying your bills late because you will not only incur late charges but you will also earn a lower credit score. A lower credit score will result to you paying more in future loans or not qualifying for other loans such as home loans. Credit Repair companies can tremendously help get a better understanding of how these can harm a credit score.

There are more financial mistakes but the above ten are the main ones to avoid come 2016.

About the Author

John McConnell is an innovative leader and provider of credit report repair services in the United States.

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