Hello and welcome back for Part 2. We talked about a number of common mistakes that people make with their finances in Part 1. Withholding information from family members, failing to use retirement plans to build wealth or using them inadequately and also under insuring your biggest assets which are your home and your life were some of the mistakes, all of which can hurt you greatly financially.
We’re going to talk about a number of other common financial mistakes here in Part 2, like ignoring your credit report, mismanaging your debt and not communicating. By knowing what they are you’ll be able to avoid them yourself, cut down on financial mistakes, guard your hard earned money and have an excellent nest-egg up and waiting for you the day you retire. Enjoy
When you consider that the average interest rate is about 14.3% will it you’ll see clearly that credit cards are one of the most expensive types of consumer debts. A recent survey in Consumer Reports found that almost half of the respondents carry a balance on their credit cards and 8% reported that they had made at least one late payment in the previous 12 months. Even worse practically a fifth of all respondents, 18%, said that by using credit cards loans they had accrued a debt of over $10,000. 13% of the people surveyed responded that they only pay the minimum amount that’s due on their credit cards every month, a strategy that could mean paying off the same debt for decades.
A quick example sure to get your attention is this; if you have a $2000 debt and you paid only the minimum payments every month, it would take you 24 years to pay off that debt at an interest rate of 18%. The numbers here clearly show that paying the minimum will as well as a accruing major debt on credit cards is a huge mistake.
Another example that millions of people make is to ignore their credit report and never take the time to learn exactly what it means. Many consumers don’t know that they can obtain a free credit report from each of the three major credit bureaus, Equifax, Experian and Trans Union, for free once a year. A recent survey showed that four out of five people, a whopping 81%, have never taken advantage of these free reports to see what information was contained in them. Considering that one of the fastest growing crimes in the world is identity theft, ignoring your credit report could be a big mistake.
The fact is, not only does your credit report show the history of anything you’ve ever been loaned from any lender, it will also show any inquiries that you’ve made to any credit company, even if they weren’t fulfilled. If you haven’t applied for a credit card in years and you suddenly see that somebody applied for three of them when you check your credit report, you may just foil an identity thief before they can take advantage of you.
Speaking of harming your credit report one of the biggest mistakes that you can make, besides racking up huge bills on credit, is to pay them late on a regular basis. One late payment might not harm your credit report and, if you those been a good customer, you might even be able to get your credit card company or whoever the lender is to let you slide. If, however, you start paying bills late on a regular basis it can damage your credit badly and for up to five years. .
If you can’t pay your bills on time the best thing to do is contact your lenders and creditors, let them the situation and seek a solution. In many instances they will allow you to pay less money as long as you pay something and you’ll avoid late payments, late payment fees and the damage that they can do to your credit report.
That leads to last mistake on our list which is failure to communicate with your lenders and creditors. The fact is, if you’ve always been a good customer and you suddenly start having financial problems that are out of your hands, letting your bank, your creditors and your credit card companies know about it before it spirals out of control is a good idea. The longer you wait to do this the more damage it will do and the harder it will be to extricate yourself from it on your own. Sometimes a phone call or two is all it takes to help get you over a financial hump and back on your feet with little damage done. Frankly, most creditors would much rather let you pay less than see you pay nothing and then try to get their money back through a collection agency.
And there you have it; two blog’s worth of excellent information that not only has educated you about the mistakes that many consumers make with their finances but also given you (we hope) a bit of advice on what to do instead. We hope you enjoyed it and that it’s been valuable and we invite you to come back and join us very soon as we’re always presenting new, interesting and valuable information across a wide variety of subjects. See you then.