Common Financing MistakesBy Caitlin in Finance
Being organized with your finances is key to a healthy financial profile and a good financial future. However many Canadians are guilty of many mistakes that can unfortunately lead to serious financial problems in the long run. To avoid falling into a financial crisis, take a look at some of the most common personal financing and budgeting mistakes that Canadians make every year.
Lack of budgeting
Too many Canadians live their lives without budgeting and setting limits on their spending. This is probably the single largest financing problem Canadians face today, and it leads to other major problems including overspending and not saving, and consequently missing payments on debt and/or only making minimum payments on said debt.
To properly set a budget for yourself you need to first figure out exactly how much money you make each month and allocate a sum to pay for your rent or mortgage, your other fixed living expenses, your utility bills and any other debt. From there you determine how much money you can allocate to other expenses such as gas, food, clothing and entertainment however you should always leave some money behind for savings – this is, of course, assuming that you have money left over from your other, monthly, fixed expenses.
Probably caused from the lack of budgeting, Canadians often spend more than they can afford – or at least, more than they should be spending. It’s easy to spend your money at restaurants or at the mall if you aren’t actively keeping track of how much money you have. Of course, it’s fun to spend money, and sometimes you don’t want to think about the repercussions of your spending – however it’s vital that you do.
To help you with your budgeting, and to avoid over spending, we recommend you download a budgeting app for your smartphone. For more information on budgeting with technology go here.
When you’re not saving, you’re digging a deep hole for yourself. What will happen if you lose your job? Or if your car breaks down? Or if your appliances break down? What about your retirement?
You have to be prepared for the future, and not saving is an all too common mistake people make with their finances. It’s a basic finance strategy that is all too often overlooked.
Only Making Minimum Payments on Debt
Many individuals push their debt burden forward by only making their minimum payments on their debt and credit cards. The problem with such a strategy is the interest you will accrue over time. Your debt will grow and your problem will only worsen, so don’t make the mistake of only making your minimum debt payments. You might be saving yourself from taking a hit on your credit score in following this strategy, however the long term effect is NOT something that you should ignore.
One of the worst things you could do to yourself is miss debt payments. This will interfere with your credit score, bring you extra fees to pay and if you’re not careful could snowball into a bigger problem. For example, when you miss a payment on a mortgage all of the subsequent payments are considered late as well, until the payment you missed is made (for more information on that click here).
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