Having to deal with money problems is something that everyone is familiar with. Making money mistakes when you’re young is fine, you can afford to. Continue making money mistakes when you are in your 30s and it will affect your future.
Using Credit Rather than Cash
Credit cards are certainly something that is very useful to have on hand. Apart from the rewards points and the convenience, you also have the security of knowing that should you ever lose the possession of your credit card, it can easily be replaced. This is often not the case with cash. However, there is always a chance that you might end up overspending when you are using your credit card. If you are not careful with your credit card, then you might end up having debt problems in the future.
Only Making the Minimum Credit Card Payments
If you are using a credit card on a regular basis, then this can certainly help you build up a great credit history. But, failing to use your credit card wisely, you will find you are able to make full payments to your lender. In such a case you will have to retort to a minimum payment plan. Although making a minimum payment is better than making no payment, but the cycle has some serious consequences.
The most obvious repercussion is that interest will keep piling up on the unpaid balance. With interest rates that can range from 15% – 25%, it will take you years to clear your debt and you might end up paying a lot of money in interest alone.
Living Beyond Your Means
The society that we live in is bombarded with images of people living extravagant lifestyle. The conglomerates and multinationals will continue to bombard your cable and TV and social media feed with things that you should be buying. With the easy availability of credit, it seems quite harmless to take out a loan to pay for a holiday, or to purchase expensive new toys on a credit card. That is, until the bills knock on your door. Living beyond our means is a mistake that a lot of people make and continue to make. If you are in the habit of doing this, then you are not alone. But, you should not allow this habit to continue. If you are not careful with this, then sooner or later you will face financial problems. And, if a large part of your income is being directed towards your debt, then saving for retirement will become difficult.
Living within your means and being careful with money is an essential life skill, and this skill will not only allow you to live a debt free life, but will also help you live a much more fulfilling life.