3 Worst Financial Mistakes That You Can Make

Making smart financial decisions is the primary goal of any financially responsible person. However, even the best of us can make mistakes when handling our finances. This is normal since the road to financial freedom is definitely not clear-cut, so there is no need to beat yourself up for making them. Nonetheless, you can learn from the example of other people and take the necessary steps to fix your own mistakes.  Here are the three worst common financial mistakes that you can make.

Don’t Rent, Own Your Home

This is one of the most common advice that people hear right after they leave their parent’s home and strike out on their own. Rent is money that you are never going to see again and will go straight into the pocket of your landlord. Most people will tell you to get a mortgage right away so that you will not waste your money on renting. However, you also need to remember that homeowners “waste” money, too. When you own a home, you also have monthly expenses to worry about such as homeowner’s association dues, mortgage insurance, property maintenance expenses, property taxes, and homeowner’s insurance.

Owning your home is not something that you should take on, even when you are not ready. It is an asset that is difficult to liquidate – if you decide to move or relocate because of work, selling your home will make it harder for you. Plus, if something goes wrong, having a large mortgage will make it tough to find the money to pay for emergency expenses.

Enjoy Your Youth, Worry about Saving When You Get Married

Because of the increasing life expectancy these days, many of us are saving for 15 to 30 years of retirement. It is definitely better to start doing this when you are still young and your monthly budget does not include the financial burden of having a family. There are many things that you can even when you are still in your early 20’s. If you are a young business owner, for instance, investing in web traffic can lead to greater returns in the future. You can also take advantage of the immediate 100% return of an employer match on your 401k.

Debt Improves Your Credit Score

One of the things that you have to always keep in mind is that there is no such thing as a good debt. Of course, there are certainly good reasons to borrow money, but having any kind of debt will weigh your finances down. People who give this advice often also say carrying a credit balance is a good thing for your credit rating. However, your credit card actually makes up only a small percentage of your credit score. There are other factors that are taken into account such as the length of your credit history, the number of credit inquiries you have had recently, your payment consistency, and many others.

You will most likely have a better credit score if you use below 30% of your available credit. What this means is that the maximum balance that you carry on your credit card at any time should be 30% or less. More importantly, not paying your balance in full means that you have to pay for late fees – this, consequently, will bring your credit score down.

 

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How Direct Debits Work

If you have ever accidentally forgotten to pay a bill, you will be well aware of all the hassle and pain it can cause. With direct debits, this need never happen again – direct debits are automatic payments which can help ensure that your bills are always paid in full and on time. Direct debits are especially useful for smaller businesses who want to ensure they get paid on time and there are a number of direct debit services out there which can help with just that.

#1: Direct Debits vs Standing Orders

A direct debit allows a company permission to debit money from your bank account on an agreed date, recurring each month. The amount you agree to will be taken at the same time each month, and any proposed changes in the date of the direct debit, its frequency, or the amount taken must be notified to you well in advance.

A standing order is different but works in the same way. With a standing order, you give your bank express permission to pay an amount to another account on a specified date or frequency. For example, you could create a standing order to pay your rent to your landlord’s account each month.

#2: Direct Debit Advantages and Disadvantages

The best thing about direct debits is that they save you lots of time and effort; you no longer need to keep track of when each payment is due each month and then manually send the money. Instead, the direct debit takes care of all that – you just need to ensure that there is enough money in your account to clear the payment. Direct debits can also help you save money; many gas and electricity companies will provide a discount for paying by direct debit because they know they won’t have to spend time chasing you up for your payment.

There is only one major disadvantage to direct debit and that’s the fact you will need to stay in control and ensure that there is always enough money to pay your direct debits each month. If you have a lot of direct debits, this can get very difficult to manage, but it is a lot easier if you have access to internet banking.  Luckily, most businesses who accept direct debits will ask you which day you prefer the payment to go out. So, for example, you could choose to have all of your direct debits taken out on the first of the month, or you could choose to spread them out over the month.

#3: Do Direct Debits Cost Money?

For customers who are having a direct debit set up from their account, banks will not charge anything. If you miss a payment and your direct debit bounces back, you could be liable to pay some hefty bank charges, which is why it is imperative that you ensure there is always enough money in your account to pay the direct debit on time.

For companies taking the direct debit, there are charges associated with them and this depends on the service provider you are using.

#4: What Happens When Things Go Wrong?

It is very rare that a problem will occur with a direct debit payment, although on rare occasions, issues may arise.  If you find that a payment has been taken out of your account that you didn’t authorise, your first step is to contact the organisation.  If they are unable to sort the issue, your next step is to contact your bank. Usually one of the above will be able to resolve the problem quickly, however, if this doesn’t happen, you can make a complaint to the Financial Ombudsman Service who will take a look at your contract with the organisation and determine whether the payment was fair or not.

Direct debits are a convenient and simple way to have your monthly payments collected from your account automatically and with minimal fuss, eliminating the need for you to keep track of payments and send the money manually. For companies, they, again, are a convenient way to ensure that you always get paid on time and do not need to chase clients and customers for your money.

 

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Ways to Pay for a Wedding & Honeymoon

Your wedding is arguably the most special day of your life, and you are absolutely right to want everything to be just perfect.  The plan is to only get married once! Creating the wedding of your dreams can become an expensive affair, and it can be difficult to get the money together so it’s exactly how you envisioned it.  We have put together some preparation tips and financial options you may want to look at whilst getting ready for your big day.

Put a List Together

The first thing you need to establish, is the amount of money that this may cost you.  Wedding costs can get out of hand, as there is always something you will forget. It could be the party favours, the cars, or the cake, anything really.  You will be frazzled in terms of planning as there is a lot to think about, so it’s important to list everything out and get an idea of what your perfect day will cost you.  Wedding planning will leave you in a better position to review your financial position and figure out what your options are.

Shop Around and Negotiate

There are lots of wedding suppliers, so the market is incredibly competitive.  This gives you the option to shop around for the best deal and reduce those costs you planned out. You may find that some offer discount in terms of the season, quantity or location.  Don’t be afraid to negotiate with them either, this is something they will be used to. If you don’t ask the question, you won’t get! Make sure before you make any decisions, you do your online research when it comes to suppliers.

Get a Personal Loan

This can be a scary thought for some people, but it doesn’t need to be.  Companies such as Everyday Loans create processes that are easy for you to receive a decision and to help you fund your special day.  They give you the capacity to apply online, and even if you have bad credit it doesn’t mean that you won’t get approved.  If you do get accepted, normally it would simply take a visit to the branch to get things confirmed. Make sure that you read the small print before signing up to any loans to make sure you are comfortable with the APR and the payment plans offered.  

Downsize Possessions and Sell

Are you moving into a new home, or looking to do a clear out in preparation for marital bliss? This gives you the perfect opportunity to have a look through your belongings and check to see if there is anything that you could live without to help fund your wedding. If there is an option to sell anything off – there are many online tools that will allow you to do this.  There are the likes of eBay, Facebook Marketplace, Amazon etc.  This should make the selling process easy for you and will in turn give you some extra cash to use for your big day.  

Bank Overdraft

Depending on the bank you are with, they may be willing to offer you a substantial overdraft to help with costs.  This is a good option, if it’s only a short-term solution and you are able to pay the money back fairly quickly. There is never usually any set up fee and you are only every charged overdraft fees for the amount of time you are overdrawn.  You of course would need to speak to your bank to come up with an agreed overdraft limit and to see if they will accept your application.

Credit Cards

This is an option if you can get a good deal.  There are many companies out there these days that offer 0% interest over a certain period of time to make it more attractive.  It’s worthwhile if this is a long-term arrangement on the 0% offer. It means that you can make the purchases you want to, and if you pay it back in the allotted time you won’t incur any additional fees.  It’s worthwhile checking on the interest rates after the 0% runs out.

Ask for Contributions

This might not be something that you are comfortable doing, but is something that is becoming more regular when preparing for a wedding.  If you don’t need any wedding gifts for moving home – then instead of registering for gifts, you can ask your guests to contribute to your honeymoon costs.  You also may have some talented friends. If you know any photographers, musicians, DJ’s or caterers – get in touch with them and ask if they can help you out.

 

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