Although there is more to life than money, life can be very brutal if you haven’t got any money. The way to financial happiness is to arrange your finances so that you are never pursued by aggressive debt collectors, you avoid foreclosure letters on your home and that you are sufficiently financially free to be able to travel anywhere any time you feel the urge to do so. The best way to avoid financial pitfalls is by not allowing yourself to fall into poor money management habits. Some people will tell you they don’t earn enough money to be able to save to cover themselves from future financial hardships. But are they being honest with themselves? No matter how much some people earn they always seem to spend more and this is where it comes down to financial discipline. Good money management can be exercised no matter what your income.
Pensioners can put money aside from their fortnightly pension if they manage their money prudently and people earning $200,000 a year plus can go bankrupt if they practice poor money management. If it happens that you do have to borrow, and this is not a bad thing if it is done for a worthwhile purpose, you must make sure you are able to repay the amount without it being a hardship. Most loans attract compound interest and it takes some time before you see any real movement downwards. It is therefore very important that you borrow at the lowest interest rate you can find. The excuses people make to avoid facing up to their own poor money management practices are quite varied and colourful. If you are guilty of any one of the following seven you should do something about it straight away as you could be heading for financial trouble:
- “I thought I had enough to cover it”. You will never be able to manage your money successfully if you don’t keep track of what you are doing. It is important to draw up a budget, even if it is only a guide, but you won’t get away with not being able to track where your spending goes for long. As your spending starts getting out of control it will become harder to face up to your true financial position. It won’t go away by itself but if you had have been aware of the situation in the first place it would never have got to this stage.
- “I just couldn’t resist it”. When you start spending more on things you don’t really need, trouble is not far away. Plan what you want to buy then decide when will be the best time to make the purchase. If you see something you feel you really want, don’t buy it there and then. Walk away and come back the next day if necessary. On most occasions you will find you won’t want it enough to come back.
- “But I got it at a sale”. Low price sales are designed to trick you into buying things you don’t need. Ignore them and only buy what you want at the time. If a salesperson starts to put pressure on you walk away.
- “I always buy at the same place”. Loyalty is a fine attribute to have in your character but there is no place for it in the world of commerce. You might feel you should get the mortgage for your home from the same bank your parents got theirs. You have always bought power from the same electricity company why change now? Companies take advantage of such loyalty and while taking a higher price off you because of it, are offering cheaper deals behind your back to others just to get new business. For instance, if you looked around and saw another financial organisation was offering a better mortgage deal than the one you presently have, don’t hesitate, go for the lower cost every time, it could save you many thousands of dollars. Your bank won’t show you loyalty if you fall behind in loan repayments.
- “I don’t need a savings plan”. Carefree and young. We have all been there. It’s a bit like having a belief that drinking as much as you like tonight won’t give you a hangover. Drink too much and you will get a hangover. Keep spending too much and the day of reckoning will surely come. The longer you keep putting off having a savings plan the closer to financial disaster you will be getting. Even if you can only put aside a small amount now, you can always increase it as you earn more. Whatever you do, don’t start your working life in the habit of living off credit. It will certainly come back to burn you one day if you do.
- “I’ll be right, my parents will always help me out”. It’s a big mistake to live with the belief that someone will always be there to help you out every time you get into financial difficulties. Sure, friends and relatives might be quite willing to lend a hand now and again, but make a habit of it and see who starts avoiding you. Think how you yourself would respond if cousin Jack kept asking you to bail him out every time he got a foreclosure letter. The day will certainly arrive when nobody will be there to help and you will be on your own. Don’t risk it.
- “Who cares about stupid credit ratings”. You should. If you don’t you will one day experience being knocked back for a loan you really need, like finance for a new car or a home mortgage. It might seem to be no big deal if you are a bit slow in paying your credit card debt. You were charged a fee for being late and they finished up getting their money anyway, that should be the end of it. It wasn’t! Unbeknown to you it was all recorded in your credit report. Every time you were late in paying and every time you overspent. Always treat your money dealings with organisations very seriously because they do, and when you start getting bad credit reports you will eventually be refused any ongoing credit.
Kristy Ramirez is an experienced finance writer who currently writes for Life Insurance Finder, an Australian life insurance comparison website where she helps people to compare life insurance quotes and select the best policy to meet their needs at the best possible price.
