Nobody is perfect. In our youthful years, we make many mistakes and therefore, have to undertake a lot of experiential learning. After all, this is just about the only available time to make such goofs and still get a chance to fix them up. You’ll not want to make such catastrophic financial moves when you are in your 40’s. Therefore, while many of these mistakes may not be fatal or irredeemable, there are a few financial moves that do not turn out positively.
You can increase your chances of a healthy financial future if you can avoid the following financial moves:
1. Purchasing a house you cannot afford
The subprime mortgage market was on of the leading causes of the 2007-08 global financial crisis. So many people rushed to buy expensive homes they could barely afford after receiving some “favorable” loan terms. The result was a high number of foreclosures as most of the homeowners could not make the payments.
Therefore, before you make such a financial move, you should properly assess your debt-to-income ratio. This way, you’ll avoid stretching yourself beyond your limits and also put a realistic leash on your wild ambitions. You’d best not run the risk of bankruptcy at such a young age or worse, jeopardize your financial future.
2. Settling on a college based on cost
We often espouse this unfounded notion that the most expensive colleges are usually the best. Some of the top colleges are indeed quite expensive, but that should not be the only factor for your evaluation. You also have to consider the value and the available prospects for what you ultimately intend to pursue. You’ll need a good job to help you settle those hefty student loans.
While going to a fancy college might seem like a great investment, the consequent student loans can be quite a burden. You may have to drag them along the first few years of your career or they could also haunt you well past your graduation. In the worst-case scenario, they may drag you down into bankruptcy at such a young age. This, of course, will be quite a factor in your future financial status.
3. Ignoring health insurance
In our youthful years, the exuberance and great health can create a sense of “invincibility” when comes to our health. You may easily begin to imagine that you have no need for a medical insurance cover because you hardly get ill. You might even consider it as a waste of money because you’ll probably never use it. Nothing could be farther from the truth. Reports indicate that more that half of all bankruptcies come from medical expenses.
The truth of the matter is that no one person is immune to a sudden need for funds to cater to a medical emergency. You may suddenly get a nasty injury during a Sunday afternoon soccer game with the boys or even an unfortunate road accident. Such medical emergencies can require a lot of money, which can set you back financially. A decent health insurance cover should be able to absorb a great deal of such medical emergencies.
4. Failing to pay your taxes
The internal revenue service or any such tax agencies do not have many friends. You are required to pay up your taxes promptly, no matter what you feel. Trying to outsmart the taxman could turn out to be a fatal financial move. It could land you in jail. Also, if you have a habit of delaying your payments, the fines, and interests payable could unnecessarily increase your financial burden.
In some cases, the taxman could impose some federal tax liens that could rear their ugly heads on you credit scores. This does not exactly help to secure or cement your financial future. There are usually arrangements to pay up your taxes in installments in case you are unable to come up with the whole amount in one go. Many issues with the tax agencies are usually avoidable. Therefore, you are well able to avoid all the possible issues that might have an impact on your financial health.
5. Piling up credit card debt
Enormous personal debt affects your credit scores, which in turn affects your ability to get important loans like home loans. That is one of the automatic effects of credit card debt. Others include the high interest rates that provide and extra burden when it comes to paying up the total debt. Before you know it, you are trapped in a vicious debt-income cycle that can cripple your financial health.
A credit card can seem like the key to every door or unfettered access to all the fine things in life. However, it is financially prudent to try and live within your means as much as is possible. Always pay up your credit card debts before they are due to avoid potential penalties. You may also take advantage of any incentives like low-interest rates for early payments.
6. Failure to invest in your youthful days
You have probably received an earful about the power of compounding investment. The real value of investing early on in life is the mere fact that you give your investments some good time to compound and multiply. An investment made two years ago, and a similar one made ten years ago can have a night and day difference! This is indeed one of the single most regretful financial moves for many people because of its simplicity and almost-guaranteed returns.
Get into a habit of saving up, however little, and watch your savings grow. These savings will certainly help to secure your financial future. This is one of those financial moves that come with a “money-back guarantee” quite literally.
Most of these financial moves have an adverse impact on our financial health. Some of them can permanently affect our careers or capacity to earn an income. If say, you land in prison and get a criminal record; your career could take a major hit. However, each of them can be rectified if you are determined enough to get back on track towards financial success.
How about you? What other financial moves do you regret? Share with us in the comments section.