Debt is always lurking around the corner waiting for you to make poor financial decisions. There are many financial habits that can lead you down the road to debt. Some pull you in with the idea of it being a smart financial move. Others are just bad habits we start because we feel like we do not have alternatives.
In order to avoid these pitfalls and hold onto more of your hard earned cash, keep in mind these 5 poor money habits.
Setting your bills up on automatic billpay
I am sure many of you have at least some bills on automatic pay. Not the greatest idea. Your savings on autopilot will serve you much better. Although autopay ensures you will not forget to pay a bill, you can sometimes forget to have enough money in your account to cover it. If this happens, you are now getting hit with those high overdraft fees or returned money fees. If you are the forgetful type, setting up alerts will help you remember to pay your bills.
Not staying on top of your credit report
Even if you never look at your credit report other people are. Your credit report and your credit score are key factors used to qualify you for everything from credit cards, loans, bank accounts, insurance policies and more. Now is the time to access a free credit report and check for accuracy. If there is any inaccurate information, now would be the time to contact a credit repair company. They can help you remove negative reporting and also monitor suspicious activity. They will help you will achieve a better understanding of your credit report and also help you devise a plan to get your credit back on track.
Having no emergency fund
Unforeseen expenses like car repairs or those that come from a job loss, can be devastating. Too often there is no money to cover them. Having an emergency fund provides you with that essential support when things take a wrong turn. You should have at least 3 months of living expenses if you are a two paycheck family and 6 months if you’re a single paycheck family. If that is not doable, even having a few hundred dollars saved can help you with groceries etc and help you avoid reaching for that credit card.
Making late payments
Even without money problems, if you get into the habit of paying your bills late, your credit score will go down. This in turn could mean that present creditors can hike up your rates or even slash your credit limit.
Be sure to set up those reminders to pay your bills. Also keep in mind that electronic payments do not happen instantaneously. Be sure to check and see how long the payment process takes.
Co-signing a loan
Co-signing a loan is never a good idea. Their debt is now your debt until it is paid off. Furthermore, any late or missed payments can also be added to your credit report, which will certainly lower your credit score. This can lead you down a road of increased interest rates and cut credit lines. Even if the other person makes every payment on time, that loan balance is recognized as an obligation when you apply for any future loans.