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15 Money Mistakes that Can Damage or Destroy Wealth

15 Money Mistakes that Can Damage or Destroy Wealth

Why do some very smart people end up experiencing a financial nightmare? Sometimes, it’s due to bad luck or bad timing. But not always. Often, it’s the result of making some (or possibly all) of these gigantic money mistakes:

  1. Not having a budget. As the old saying goes: a failure to plan is a plan to fail.
  2. Buying “too much” house. Leave real estate speculation to skilled investors.
  3. Failing to invest in career development. Saving money is just one side of the wealth equation. Boosting earning capacity is the other. For example, if you want to elevate your career in the enterprise telecommunications field — and increase your salary, benefits and perks — then you should enroll in courses that teach unified communications solutions, project management, network infrastructure, and so on.
  4. Not having emergency savings. Experts suggest that you should have at least three month’s worth of cash tucked away and easily available if required (i.e. it’s not locked-up in some asset or investment and cannot be liquidated in a hurry).
  5. Not realizing the financial and legal implications of co-signing on a loan. If your co-signee defaults, then guess who creditors are going to go after? That’s right: you!
  6. Only making the minimum payment on credit card balances. Credit card companies love this, but you definitely shouldn’t.
  7. Trying to keep up with friends and family members who (at least appear to) have more money. Focus on yourself and keep your eye on the prize.
  8. Not understanding the importance of your credit score (and how to effectively raise it).
  9. Not understanding the total cost of borrowing on any loan. The interest rate or APR is not what matters. How much you must pay, and for how long, is what counts.
  10. Getting into a relationship with someone who is financially incompatible with you. Sorry, this isn’t very romantic. But the number one reason for break-ups, separation and divorce is disputes regarding money. If you’re a big saver and your significant other is a big spender (or vice versa), then it’s just a matter of time before the battle lines are drawn.
  11. Raiding your retirement account to pay for basic living expenses. You could lose tens or hundreds of thousands of dollars in the long run.
  12. Taking on huge student loans. The debt can be massive and take decades to pay down, and unlike other types of obligations like credit card debt or medical debt, student loans aren’t discharged through bankruptcy (although there is a separate petition for student loan relief that can be filed with the courts — but it’s not easy to get approval).
  13. Always leasing brand new cars. Don’t get fooled by the advertising pitch. Basically, all you’re paying for is the depreciation. If you can’t buy a car in cash, then explore your financing options by consulting with your bank, credit union, or arranging a private loan with a family member or friend.
  14. Loaning significant amounts of money to friends or family members without a legally binding contract. Basically, if you don’t have a formal agreement, then consider it a gift and don’t expect all of it to get paid back (or maybe any of it). Of course, that may happen and hopefully will — just don’t expect it to.
  15. Obsessing day and night about money. Yes, we’ve left the strangest mistake for last: people who worry non-stop about money tend to make bad financial decisions, because they’re just so mentally exhausted. It’s important to be focused and committed, but don’t make your life all about money!

About Emma Gilbert

Working in the marketing industry since 2002. This blog is one of my hobbies.

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