Are You Falling for These Financial Tricks?

Carrie Schwab-Pomerantz on

Dear Readers: It's the rare person who doesn't occasionally fall into some poor financial habits that can lead to potentially scary results. This fall, make sure you're not tricking yourself into a financial bind. Rather, treat yourself to greater security by reviewing these 10 personal finance "gotchas" and making any necessary changes. The results can be better than chocolate!

1) Trick: Assuming your money is going where you want it to go

You're making ends meets, so you're on top of your money, right? Maybe not. Money has a sneaky way of slipping away if you're not careful.

Treat: Instead of making assumptions, make a budget. Start with two lists: your necessary monthly expenses and your nice-to-haves. Can you cover both with your income? If not, get out the red pen and start crossing off some of the extras. You don't have to give them up completely, just save in advance. Then when you want to treat yourself, you'll enjoy it even more knowing you've got it covered.

2) Trick: Thinking a financial emergency won't happen to you

Unexpected expenses can creep up on you even if you're young and healthy. A job loss? An accident? It may not happen, but it could, and it could cost you big time if you're not prepared.


Treat: Build an emergency fund. Aim to cover three to six months of essential living expenses by setting aside cash in an easily accessible savings or money market account. You don't have to do it all at once. Just make your emergency fund a line item on your budget and save what you can each month until you reach your goal.

3) Trick: Confusing good and bad debt

Debt like a mortgage or a student loan that's low-interest, possibly tax-deductible and is used for a potentially appreciating asset can actually work in your favor. That's the good kind. Credit cards and other high-interest, nondeductible consumer debt? Even though it's convenient, that definitely falls into the "bad" category.

Treat: Don't charge more on your credit cards than you can pay off each month. Create a plan to tackle any balances. Start by paying as much as you can on the highest-interest debt while always making at least minimum payments on the others. Work your way down until your credit card balances are paid off -- and stay that way.


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