Everyone knows the general tips for saving money, getting out of debt, and living frugally but do you know the warning signs or big mistakes that could cause major financial hardship? I want to take a look at a list of things that, IF done, will guarantee not just financial failure, but a lifetime of being broke. These big mistakes are easy to make and can lead to financial trouble for the rest of your life.
12 Ways to Hurt Your Financial Future:
- Buying Too Much House – What happens when you buy a home that you really can’t afford? When budgeting or cutting back doesn’t work, people often shut down their assets and borrow from their retirement plans to keep up with the monthly payments. Talk about putting your financial future in jeopardy. Before you sign on that dotted line, make sure you didn’t bite off more than you can chew. It’s a good idea to look at your overall budget and make sure you can afford the monthly mortgage payment, taxes, and expenses that come with owning a home.
- Hazardous Driving – The National Safety Council estimated in 2012 that the average cost of a car crash where there were no disabling injuries was $8,900. If someone was hurt badly in the crash, but not killed, the average cost was $78,900. If someone died because of the car accident, the cost was around $1.4 million. Survivors of such an accident could spend the rest of their lives trying to recover their financial health, and accumulating large amounts of medical-related debt. Don’t text and drive! Be safe!
- Taking Out Too Many Student Loans – It’s hard to know exactly how much college is going to cost you. There are the books, food, room and board, tuition, entertainment money, etc. One thing you don’t want to do is take out too many student loans or have your student loans be way too high and more than you actually need. Also, attending a private school at the expense of taking on a large debt load or depleting your parent’s savings will result in increased stress and constrained career choices.
- Not Having Enough Insurance – Having inadequate insurance is an easy way to ruin your financial life. When you’re young and naive, health insurance can seem unimportant. Choose unwisely, though, and you can spend a lifetime paying for your mistake. Too little health insurance and a back injury can leave you broke for life. Buying too much health insurance saps money that could be invested, compounding for decades. It’s a delicate balance so it’s important to speak with a health insurance professional that can answer all of your questions and help you decide which plan is right for you. This goes for all types of insurance.
- Do Not Save For A Rainy Day – If you don’t earn much and you can barely pay your bills, the idea of saving money might seem impossible. When you only have $10 left at the end of the month, why even bother trying to save it? Everyone has to start somewhere, and if you work at it, your financial condition is likely to improve over time. Saving money is worth the time and the effort. It gives you peace of mind and options. Also, the more you save, the easier it becomes to build up additional savings in the future. Here are a few tips to help you save more money!
- Get A Divorce – A divorce can be costly for both parties involved. Financially and emotionally, many things can go wrong and spiral out of control. The ongoing expenses of divided households and shared parenting (if kids are in the picture), of alimony and child support, and of lawyer fees, often ruin the financial futures of both sides.
- Accumulate Excess Amount Of Credit Card Debt – Instant gratification, the mantra of the late 20th century, has resulted in a massive amount of credit card debt. The result? Millions of Americans paying the minimum on their credit card debt, compounding interest, all for the privilege of buying a meal they can’t remember eating, a tune they now loathe, or shoes that are no longer comfortable. Instead of asking themselves if they really need those things or just “want” them, they just pull out that plastic and swipe away. This is a surefire way to ruin your financial future.
- Don’t Save Enough For Retirement – You may think this won’t impact you until you’re past 65 years old, but if you don’t start now it will only get worse. Americans are doing a terrible job saving for retirement. The median 401(k) plan balance is a measly $18,900. While there is raging debate over how much you need to save in order to retire comfortably, everyone would agree that most Americans are falling woefully short of achieving this goal. It may not seem important now, but it is. You need to protect and invest in your financial future now. You can use this Retirement Calculator to help you!
- Handshake Instead Of Signing Contract – A handshake is a person’s word and promise. Most of us would like to believe that it’s enough. However, you can get burned when making deals with only a handshake. There’s a lesson to be learned from a real estate closing; all that paperwork is there because doing business with a handshake can lead to financial disaster. Don’t ever accept someone’s word with a handshake; always get it in writing, and most times its good practice to get it notarized as well.
- A criminal record – A whopping 92% of all employers run background checks. What does that mean if you have a criminal record? Unfortunately, you are going to have a very tough time finding and maybe even keeping a job. Former felons are now categorically barred from working in more than 800 occupations because of laws and licensing rules, one study estimates. Sadly, over 65 million people in the United States have a criminal record. Staying out of trouble may be the most important thing you can do to protect your financial future.
- Unplanned Family – Babies are a blessing and a miracle, but they can also bring about a ton of financial stress if you aren’t prepared for them. Children are expensive and we all know that, but some studies report that the cost of a child’s first year of life is well over $10,000. It could be even more if you plan to put the child in daycare during the week. If you aren’t prepared for that and you have no money saved up, that’s going to put you in a very bad situation financially.
- Being A Not So Good Employee – For the vast majority of people, work will be the only source of income for their family. One way to destroy that earnings potential is by establishing a reputation as a bad employee. There are numerous ways to be a bad employee – laziness, dishonesty, unpleasantness, tardiness, immaturity, and so on. If people do not like the work that you do or the experience of working with you, they will not promote you, they will not give you any raises, they will not give you more responsibility, and they will not help you advance your career. You may even get fired and that’s definitely not good for your finances. Keep a strong work ethic at all times!
A successful financial life is all about maximizing the positive decisions and minimizing the negative ones. The good news is that all of these negative decisions that we’ve listed above can be controlled and avoided. A little practice, research, and a fair amount of self-discipline are all that it takes to avoid some very costly financial mistakes. Don’t let these things ruin your financial future!