13 Big Money Mistakes People Make—and How to Avoid Them
Money Mistake # 8: Not understanding the terms of a co-signed loan
Another big thing that can affect your credit is co-signing a loan with someone who doesn’t hold up their end of the bargain, dragging down your credit score. It can take years to recover from this kind of event. Take it from this woman–who saw her stellar credit plunge 200 points.
Money Mistake #9: Not realizing that a car payment can affect other goals
A lot of people take on car payments that they can’t afford, accepting a $400 or $500 payment plan without realizing that they’ll have fewer choices when it comes to other financial goals and wants. On top of that, they forget to factor in the cost of gas and insurance, and their car is suddenly guzzling down more than a quarter of their budget.
If you’re reading this, thinking, “Uh-oh … ,” don’t worry. You can trade your car in for a less expensive model—i.e. swap a $20,000 vehicle for one that’s $10,000, and voilà!, your payments have been halved. Or get a more fuel-efficient car that doesn’t need special gas. If you lease, check out SwapaLease.com or LeaseTrader.com.
Money Mistake #10: Not having a will if you have minor children
Your will allows you to name a guardian for your children in the event of your death. Simple question: If you die, do you really want the state to decide what to do with your kids?
RELATED: Wills & Trusts 101
Money Mistake #11: Not having life insurance if you have minor children
Again, this is a simple question: In the event of your unexpected death, how would your family cover immediate expenses, such as funeral costs, as well as long-term ones, like mortgage payments? Buying an adequate life insurance policy can help ensure that your family is well protected.
Money Mistake #12: Not having long-term disability insurance
While an emergency fund is a crucial part of any personal finance plan, you should also have disability insurance. It will help if you endure any long-term illnesses, bringing in, say, 60% of your normal salary—an amount that could allow you to stay in your current home.
Before buying an individual policy, look into whether your company offers long-term disability insurance as part of your benefits package. If so, you’ll likely have to pay extra for this coverage, but it’s much less expensive to be part of a group policy than to buy one on your own. If not, shop around for a policy that covers you for at least two years in your “own occupation.”
Money Mistake #13: Not having a plan for your finances
If you don’t have a plan in place for your finances for paying down debt, building savings or setting aside enough for retirement, you’re not getting ahead. This also means that you’re not going to be able to move ahead as effectively on major life goals.
So figure out where you want to be in life a year from now–and then see how your money can help you get there.