Procrastinating on financial matters is often an expensive mistake. It can lead to massive debt, and bankruptcy may be the best resolution in the end. Fortunately, making small and smart changes now can save you from costly consequences.
1. Paying the minimum monthly requirement on your credit card
Credit card companies require a portion your debt to be paid every month as a minimum payment. If you choose to only pay the minimum amount on your monthly bill then the credit card company profits by charging you high interest rates. Your interest will compound, accumulating more and more over time.
According to the Federal Reserve, the average interest rate for credit cards is 15 percent, meaning many people pay even more. The lower your minimum payment, the longer it will take you to pay off your balance. Avoid minimum payments all together and strive to pay off the entire balance on your card every month.
2. Not saving for emergencies
According to a survey by CareerBuilder, about 8 out of 10 people live paycheck to paycheck in the U.S. Someone who lives paycheck to paycheck will have a difficult time acquiring an emergency savings, especially for the recommended amount to cover three to six months of regular expenses. However, contributing just a small percentage of your paycheck to a savings account can help you grow a sizable emergency fund over time. This will be an important strategy for staying out of debt when major expenses come your way, such as a medical emergency or vehicle repairs.
3. Ignoring loan debt
Neglecting to pay down student loans, mortgage loans, vehicle loans and other types of loans will cost you more in the end. Like credit cards, the lender will charge an interest fee for missing monthly payments. You may consider discharging your debt in bankruptcy, but most student loans cannot be discharged.
4. Not contributing to a retirement account
Retirement feels far away for some, but it is a mistake not to contribute to a retirement savings early. A funding crisis is pending with Social Security, and there is a high possibility that future retirees will not get enough money to last. It is recommended that you start a retirement account as soon as possible. If you end up filing for bankruptcy in the future, your retirement savings are protected. Retirement savings cannot be touched by creditors.
Many people wait to contribute because they feel it is already too late. Fortunately, every penny contributed to a 401(k) plan counts. A small amount added to a retirement account can grow significantly over time.