Personal finances can be a tricky thing. Managing your money so that you always come out ahead can be a lot harder than it sounds. That being said, there’s no point in sabotaging your own efforts in the process due to a lack of information. Below are five reasons explaining why you might be sabotaging your finances without even knowing it. If any sound familiar, you may need some help to turn things around.
You Don’t Know How to Budget
A budget is the single most important tool you can use in order to keep your finances on track. A budget is a detailed spending plan that accounts for how much money is coming in while also controlling how much is going out. Not knowing how to budget can make it nearly impossible for you to understand where all your money is going.
You Don’t Understand Interest Rates
There is no such thing as free money. Every form of credit comes with interest. Interest rates are set by lenders based on their policies and your credit rating. If you don’t understand how interest rates work, you might be paying too much when borrowing money. You might also be taking on forms of credit you can’t afford.
You Make Minimum Credit Card Payments
Credit cards get a lot of people in trouble because they seem like a far away debt that can be paid later. The trouble is that later includes exponentially high levels of interest. Making only minimum monthly payments on your cards is putting you at risk of never fully repaying what you owe. Continuing to charge while making minimum payments almost guarantees you will never be out of debt.
You Don’t Understand Your Credit Score
Your credit score is a numerical representation of your ability to pay your bills. If you don’t understand how lenders view it, a low score could lead to higher interest rates on everything from car loans to mortgages. You’re entitled to one free copy of your credit report every year from each of these nationwide credit reporting companies: Equifax, Experian, and TransUnion
You Don’t Save
Finally, you might not be saving enough or at all. This will hurt you if an unexpected financial need ever arises.
You might be sabotaging your own finances without even knowing it. If so, it’s likely due to a lack of knowledge. Take a few financial classes or work with a counselor to learn what you need to know. It will make a big difference.
