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Avoiding Bad Financial DecisionsSubmitted by Townsend Asset Management Corp. on August 23rd, 2019
While we’ve all made financial mistakes, there are some decisions that can be much harder to recover from. Here are just a few of them:
- Spending more than you make. This usually occurs when overusing credit cards. While credit cards play an important role in building your credit, they also present a challenge, particularly to those that enjoy spending money. You can quickly find yourself maxing out your credit limit, being slapped with overdraft fees, and seeing your credit score drop precipitously. Ideally, any expenses placed on a credit card should be paid off at month end. While this may not always be the case, it should be the rule, not the exception.
- Making emotional purchases. Had a bad day at work? Be sure to avoid stores on your way home. While purchasing smaller items can certainly put a dent in your wallet, you’ll likely recover with little damage done. However, making a large, emotional purchase such as a car, a home, or an extravagant trip to Europe may do much more damage than you can quickly recover from. If you’ve just suffered an emotional upset of any kind, avoid making any financial decisions that you cannot reverse.
- Going to your family and friends for financial advice. Unless they are financial professionals, chances are what has worked for them in the past will not work for you. Listen with interest about that hot stock or the latest start-up to invest in, but don’t make any decisions without consulting a real professional.
- Not creating a budget, or creating a budget but not using it. A budget can guide you from your post-college first job to buying your first home, to saving for retirement. But like any other tool, a budget will do you absolutely no good if it’s not used. Take the time to create a realistic budget and follow it faithfully.
- Buying the home you fall in love with, rather than the home you can afford. If you’re lucky, they are one and the same, but for most people, their dream home is not a realistic financial investment. It doesn’t mean you have to give up entirely on your dream home, but instead put it off until you are in a better financial position.
- Not planning sufficiently for retirement. It may seem light years away, but retirement will be staring you in the face a lot sooner than you may think. Start saving now, even if it’s just a few dollars from every paycheck.
While you may not be able to avoid all bad financial decisions, avoiding most of them can go a long way towards a creating a financially secure future.
*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by Advisor Websites to provide information on a topic that may be of interest. Copyright 2014-2019 Advisor Websites.