Did you know that a large portion of bankruptcy filers ended up in financial trouble through no fault of their own? Medical, economic and employment factors are the biggest culprits to people’s financial lives. However, that isn’t to say that some of us couldn’t be changing our habits to prevent a financial disaster caused by unexpected events.
No one sets out to overextend themselves in a mortgage that may eventually result in default and foreclosure, but it happens. A common mortgage trap people get into is buying a home at the top of their pre-qualification amount. Just because you are qualified to borrow up to $300,000, does not mean you should purchase a home for that price. It all boils down to monthly payment, more specifically can you afford the payment now and in the event you lost your job.
Another trap is financing 100 percent of your mortgage loan. Although many lenders offer this option, it is not necessarily a good idea. The general rule is: if you can’t afford to put at least 10 percent cash down on a house, you can’t really afford to buy it.
We could all use a little help with managing our money better and keeping track of our finances. The use of credit cards has lead most of us to an “out of sight, out of mind” mentality when it comes to dealing with our money. We charge now and pay later, but what many of us fail to pay attention to is just how much more we are actually paying later in interest charges.
One of the biggest mistakes people make with using credit cards is not prioritizing purchases. Buying everyday or miscellaneous items such as food, gas or groceries is a bad habit when it comes to using credit. Credit should be used for large purchases that you cannot afford to buy in one lump sum, but can easily pay off within 6 months.
Further, less than one quarter of all Americans report having and following a monthly spending budget. When we don’t make our finances a priority, we can quickly overspend and end up without the money needed to pay our bills or essential expenses.