The Advantage Blog


Money Traps That Can Be Very Costly

money trapsAccording to Dave Ramsey, a well-known speaker on financial topics, “Managing money is 80% behavior and 20% head knowledge.  It’s what you do, not what you know.”   

Here are a few money traps that with a little knowledge you can avoid some very costly mistakes.  By doing so you’ll be in a stronger financial position and better able to manage through times when money gets tight.

You Need a Family Budget
Living without a budget is a guaranteed recipe for financial disaster. Having a plan for your money — no matter how much or how little — is one of the best things you can do to avoid financial traps.

When we have a plan we are less likely to spend on items that we really don’t need.  For some suggestions on how to get started go to Creating a Family Budget.

Determining a family budgetAvoid Buy Now, Pay Later Purchases
Purchasing items on credit instead of waiting to pay with cash is very tempting when you find something you think you need.  This has created financial hardship for many families when they purchase more on credit than they can afford.

Ask yourself, if you can’t buy it with cash, should you be buying it?  There are a couple purchases, homes and vehicles, where it may be necessary to buy on credit, but only to a level that fits into your family budget.

No Money Down is an Expensive Way to Go
The no-money-down trap is simply another way to get you locked into making long-term payments on items you need to be buying outright. This leads to paying interest charges on a purchase, making the real cost much higher than the original purchase price.

Acquiring Too Much Credit Card Debt
Credit cards can make it easy to spend beyond your budget and create financial hardship.  Here are some common mistakes that need to be avoided.stack of credit cards

  • Charging more than you have in your bank account
  • Not paying your bill on time
  • Not paying off the entire balance each month
  • Making only minimum payments each month
  • Having too many credit cards
  • Using your credit card for emergencies

iphonePurchasing the Newest Tech Products
For those who feel they have to have the latest iPhone, TV or gaming system, this is a trap that can lead you to spending hundreds of dollars when what you have probably does all you need it to.  All these items, along with being expensive, also have monthly fees associated with them.

Think twice before buying something that may not provide a great deal of additional benefit while it’s taxing your wallet heavily.

 

retirement savings jarPutting Off Retirement Contributions
The sooner you begin building your retirement fund the more likely you’ll have adequate investments to retire on.

Putting off contributing to your retirement account is a common miscalculation when we believe we can make it up later.  Not taking advantage of compounded interest over many years can reduce your nest egg and impact your retirement years.

Local Financial Guidance
The Mitchell Agency does not offer financial counseling, but we do know several local financial planners and other resources that can help you create a family budget and provide recommendations on how to avoid these financial traps. Just give us a call at 765-742-1135.