Chris D. Hefty
12 Money Mistakes that will Put You in Debt: Part 2
In my last post, I discussed six mistakes many Americans make with their money that ultimately lands them in serious debt. As an experienced Colorado bankruptcy attorney, I realize not all debt is incurred at the fault of the debtor; in many instances, an unexpected life event, such as surprise medical bills or job loss, can severely hurt your financial well-being.
Unfortunately, there are instances where debt it is accumulated at the fault of the debtor, mostly due to a misunderstanding as to how to best handle their finances.
If you missed the first six money mistakes to avoid, check them out in my last post. As promised, here are the final six tips:
- Not taking advantage of your employer’s 401(k) match: If you ignore the money your employer will contribute to your 401(k) or retirement plan, you’re basically throwing away free money. Typically, there’s also a nice tax deduction that comes with contributing to a traditional 401(k) plan.
- Borrowing to buy things that lose value: As I pointed out before, a car is constantly losing value. The same thing goes for big-screen TVs, audio equipment, video cameras, and fancy sports equipment (skis, snowboards, etc.). Try to pay only cash when at all possible, or else don’t buy it.
- Chasing credit card rewards: While capturing credit card reward points may feel like a game, it’s a dangerous one. It may be fun to work towards a goal (like a free trip) but you may overspend in the process. To avoid this mistake, revisit your financial goals and remember how much more important they are than chasing credit card reward points.
- Living with no emergency fund: While this may seem obvious, the article from Money Talk News states that 27 percent of Americans have no emergency savings. Build an emergency cushion to cover your net take-home pay for seven or eight months. While this may seem excessive, you’ll be glad you planned ahead if you lose your job, become injured and have to miss work, need to fix some storm damage to your home, etc.
- Watching bank fees drain your accounts: Be sure to keep a cushion in your accounts to avoid overdrafts. You can also switch to a bank that offers free checking or sign up for electronic alerts to stay on top of account balances.
- Draining your retirement savings: Your 401(k) can be a tempting sum of money during an emergency (or when buying a house, car, etc. that you can’t afford). Do not touch it. Do everything in your power to avoid raiding your retirement savings. It may be helpful now, but you’ll pay for it in the future.
I hope you will be careful to avoid these mistakes in an effort to help your own financial well-being. If you have any questions about your current debt situation, contact an experienced Colorado bankruptcy attorney today to discuss your options.