Do you want to regain the financial control you have lost? Your financial life can be a uniform graph as there will be fluctuations. There will be situations when the most likely solution can turn out to be the biggest mistake.
Borrowing money can be one such instance where most people are prone to make a blunder. This is because a potential offer which could be a trap seems appealing to borrowers. It ideally provides every flexibility that can make their life easy.
In reality, such offers do not exist and can be a scam as well. Getting a loan without a guarantor, without comparing the rates and analysing the features, is a pitfall. In that case, no one can guarantee that these loans will be of any help to you.
The first thing you must validate is whether rates are within an affordable range or not. After making sure about it, move on to checking if you can pay down the debt as per the deadline provided. These confirmations are a must before you seal the deal with a lender.
When you accept a loan proposal without going through these steps, getting a favourable offer is uncertain. It is most likely that you can get a loan with rates beyond your financial capacity. Then, this whole endeavour will go in vain because of a silly mistake.
In this manner, there could be other blunders that might cost you money. Take a look at the possible pitfalls you may encounter by reading through this blog.
How to avoid losing control of your finances?
There are some key blunders that can derail your financial stability. To regain the lost control of your finances, you must prevent yourself from making a few mistakes. Some of them might happen voluntarily or involuntarily at the same time.
Some knowledge about them and pre-preparation can help you avoid facing the worst consequences.
· Swiping credit cards at an ATM
You must understand the right purposes that can maximise the benefits of having a credit card. The maximum credit limit you get with them should not be exceeded at any cost. Most importantly, you should get them to swipe up and sponsor a few purchases.
They should not be used to pay the cost of daily essentials. Another aspect that you must pay attention to is not using them at the ATM. This means that you should not use them to extract money.
Then, you will have to bear the burden of ATM charges. This will start applying once you swipe your cards. Besides, this activity of swiping the card at an ATM will be reflected in your credit reports, and you will know what can happen next.
In this regard, you must know that the use of cards at an ATM will be considered a red flag, according to the lender. To carry out cash withdrawals, you should always rely on a debit card which will hold your money.
You do not have to pay any interest to utilise your own money. Thus, refrain from swiping your credit card at an ATM.
· Taking loans when you are not supposed to
Loans are not a sure-shot solution for every pressing situation. You must know when you can make the most out of getting a financing option. Whenever you face a cash crunch, you should not reach out for loans.
The frequency of borrowing money should be limited. Again, you can borrow money even when you do not have a job to support repayments. In this case, you can get loans on benefits which are meant for jobless people.
However, it does not mean that you should see it as an opportunity to get money for whatever necessity. Loans should be considered for an emergency situation like unemployment. There are special loans that you can get based on alternate source of income like a side job.
Thus, if you cannot make sure about repaying loans, you should stay away from borrowing. This will only increase your financial trauma when you are left with no income source. The benefits you receive from the Government should be used smartly.
· Avoid comparing rates
At times, switching banks is a good practice as it may let you grab the best rates of interest. Thus, if you have happily settled with the bank account you opened a long time ago, you are indeed a loyal customer. However, you might be missing out on a few perks of enjoying affordable rates.
Maybe the loyalty you have towards your bank is paying off in some form. It is up to you to decide which you can optimise the benefits you can avail of. You can also do the same with your broadband service.
Some other providers might be offering broadband services at better rates. Without comparing, you will be clueless about the way you can save money in various ways. In the case of online shopping, repeat the same price comparison exercise.
You will not repent later, seeing the amount of money coming back to your wallet.
· Ignoring retirement savings
You might see yourself as too young to think of retirement. Nevertheless, the opposite is true, as saving for this purpose should be done as early as possible. This way, you can have time on your side.
When the time for retirement savings elongates, you can have a considerable amount in your cash reserve. Thus, check how much you contribute for retirement so that you can adjust and save more. A small-sized saving for this purpose might not be enough.
You should not overlook the inflation factor that can elevate the cost of living with the passage of time. Look for ways you can maximise your and your employer’s contribution towards retirement. For more clarity, you can even contact an advisor who has the knowledge and experience at the same time.
· Too much dependence on overdrafts
When you rely too much on the overdraft facility provided by your bank, you are actually misusing it. This has been made available to manage urgent purposes. One important thing not to forget about overdrafts is that they will attract interest charges.
Yes, you have to pay fees as your bank account get overdrawn. The amount you will be able to access is actually an additional amount issued by the bank. You can have the money when there is a necessity and not to sponsor luxury expenses.
You can never get the money in an interest-free way. For this reason, avoiding this avenue to arrange funds during a crisis should not be a priority.
· No budget and no emergency fund
This might sound too mundane as you will come across a lot of resources telling the impact of budget. You accept it or not, the significance of having an emergency fund is undeniable. Your financial journey would be incomplete without them.
Thus, you must formulate a budget plan so that you can reap many benefits later. Once you start this process, the creation of an emergency fund will be an inevitable step. With the help of this financial plan, you can begin the process of saving.
The bottom line
You will witness a lot of mistakes done by you during your financial journey. These should be like a lesson for you. Find out where you did the wrong and make sure that this should not happen in the future.
