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Personal Finance Mistakes To Avoid

>> Tuesday, January 5, 2010

Personal finance often is about the things you should do, but it is actually the things that you do not do that are easier to carry out. Some mistakes those just starting out to work should avoid.

1. Build any sort of consumer debt (credit card & credit line debt)

This is an absolutely killer. We all have unlimited "wants" and we want it now. So money is spent on 'something' you wanted. That 'something' didn’t bring happiness, so you bought other 'somethings'. It’s a vicious cycle.

2. Wait on saving for retirement

The common mentality is "I’m not worried, I have decades to save for retirement". But any small amount set aside will enjoy the effects of compounding. Think twice between spending and saving.

3. Buy a car that you do not need

It is a liability, once purchased there is no going back. It will depreciate the next day took the keys and drove it home. Consider carefully if it is such a necessity.

4. Buy a house that you can't truly afford

The biggest danger in buying an expensive house is that your housing expenses will become disproportionately high in comparison to your other expenses. If you have huge mortgage debt and lose their job, you may be in big trouble. Make your house work for you, not against you.

5. Rush to get an MBA or other graduate degree

In order for a graduate degree or MBA to make sense, you should have at least 5 years of experience related to the field that you want to advance your career in. Don’t add insane tuition debt if you don’t even know that you’ll like the job that your degree may bring.

6. Invest without understanding

Take on unnecessarily high risk by speculating in stocks or futures without understanding the underlying instruments and the cost involved. Attempting to take on the market with gut feel and no strategic plan, but expecting to make a huge profit within a short amount of time.

Others:

  • Getting the latest gadgets
  • Eating out excessively
  • Neglect getting the most value and right insurance
  • Traveling for holidays frequently

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To promote the education of individuals for the need to have a healthy lifestyle and wealth management through proper financial planning, particularly in investments.




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