5 Common Financial Mistakes
For rich and poor, finances are necessary for survival. Financial experts exist to advise individuals on the best ways to develop and manage their finances. Some specialize in helping people correct mistakes made with their finances. From investment mistakes to savings mistakes, financial mistakes can lead to a poorer quality of life.
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Bad Investing
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Investing in stocks, bonds, CDs and other annuities can be a mistake if you don't know enough about each particular item. A September 2010 article for Financial Highway explains that some ETFs (forms of stocks) can result in the loss of money because of the rollover of contracts.
Retirement Account Misuse
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Some 401(k) plans allow individuals to make early withdrawals, causing some to wipe out their accounts. Some workers fail to rollover their 401(k) plan to new employers. Some workers borrow from their 401(k), but if you leave your employer, your loan must be paid within 60 days or state and federal taxes can be levied.
Bad Credit
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Credit is designed to provide those who are responsible with extra cash when, in fact, they are limited in their ability spend. In return, creditors permit individuals to make incremental payments to cover expenditures. However, failure to make timely payments can lead to excessive debt, which can lead to low credit scores. Low credit scores can prevent individuals from qualifying for lower interest rates for cars and homes.
Paycheck to Paycheck
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According to a March 2011 article at Entmoney.com, the U.S. savings rate fell under 1 percent in 2007. In comparison, countries such as the Netherlands, Italy and Norway had close to 10 percent savings rates. Debt is often the result of individuals living paycheck to paycheck and not having enough money in their savings to cover unexpected expenses.
Living Beyond Means
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One sure way to get into financial trouble is by making purchases you cannot afford. For instance, living as if you make a six-figure salary when you make under $50,000 is the beginnings of debt, increased stress and the eventual loss of your possessions. Spending extra on dining out and movie nights can add up and can be financially crippling if you do not have the income to justify these expenses.
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References
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