Horror Stories That Can Make You Fear Your Finances
Everyone has a fear; heights, snakes, spiders, the dark, failure… any or even all can lead to sweaty palms and racing pulses. While many people say that facing your fears is the best way to conquer them, the following are financially spooky things you really should try to avoid, so you can stay clear of deadly debt and potential financial doom.
1: Zombie Credit Cards
Paying the minimum on your credit cards is like trying to kill a horde of zombies: oh, sure, you might be okay at first, but they’ll eventually catch up with you. Even a few thousand dollars can take a decade or more to pay in full. The best way to destroy these is to pay as much over the minimum as your budget allows.
2: Ghostly Emergency Savings
The thing about ghosts is that they’re often not really there. Unfortunately, that’s also the case with the savings of too many people. Having an emergency savings account of at least $500 (preferably six months take home pay) can keep you from using credit for emergencies (e.g. car repairs) and can help you stay out of monetary graves. Military life can bring about unexpected financial hardships, so be prepared by stashing away some savings to fall back on.
3: Haunted Home Equity
Far, far too many people use their homes as ATMs, withdrawing the equity they have built to date. While there are times when borrowing against your home equity is a smart financial decision, don’t get hounded by the Home Equity Loan of Doom. You should really try to maximize equity by paying down your mortgage sooner (but not before your credit cards); this will give you much more flexibility if you need to move and keep you from being “underwater” (owing more than your home is worth).
4: Nightmarish High Cost Loans
You might have thought getting that $500 loan from a quick cash, no-credit-check lender was quite the treat. Well, until you didn’t have the dollars required to pay it back. Which could cause you to roll it over into another loan… and then another… and then another. Don’t get caught in a deadly debt trap. If you need to borrow money, stay away from payday and other ghoulish predatory lenders. Seek help from a DoD sponsored loan program, including Army Emergency Relief, Navy-Marine Corps Relief Society, and the Air Force Aid Society. Or borrow from a responsible, bank-based personal lender that follows all military lending guidelines and can provide confidentiality and convenience when you’re being spooked by a financial emergency.
5: Witchy Overspending Habits
Sometimes that new big screen or shiny new wheels may seem to put a spell on you, urging you to overspend on things you can’t afford. One way to avoid this is by following a budget. If you don’t have one, sit down and write down all your sources of income, and then list all your fixed monthly expenses. Then, make a list of variable costs, like entertainment, eating out, and clothing purchases. Decide on amounts that are reasonable for you to spend on each category. Make sure to factor in debt payments and savings. Try the “50/30/20” rule: budget 50% of your income to your fixed expenses, 30% to variable costs and “fun” purchases, and 20% to savings and paying off debt. Then, look through all the purchases you made in the past month and compare your spending to your budgeted amounts. Find areas to cut back your spending, if needed, and review your budget at the end of every month. If you limit overspending, you could be living a dream, and not a nightmare.
Don’t get caught up in screams of frustration over your finances. Staying clear of these five financial horrors can keep your money matters from being buried and left for dead.