Behaviors that Can Cause You to Go Broke

Going broke and getting into a hole can happen pretty quickly if you do not control spending and more money is going out compared to coming in.  Whether that is having too high of monthly expenses, spending too much, and not preparing yourself for the future, or even a combination of all, there is definitely a fix in order so that your finances do not continue to spiral out of control, and it’s better to make those changes sooner instead of later.

Not Giving Yourself a Cushion

You may be plugging along with a financial plan until you get an unexpected vet bill that you need to cover.  How you are you going to pay if it’s a couple thousand dollars?  Probably put on a credit card and risk going further into a hole since you don’t have the money to pay for it right now, and probably spend months, even years, paying back with interest.  By setting aside a few months’ worth of expenses, you are able to give yourself a nice cushion if any unexpected charges do come up and you’ll be able to pay and move on without affecting your finances.

Charging for the Rewards

These days it can actually make the most sense to use a credit card for every purchase, just based on the fact that you have protection in case of fraud, but maybe even more important is the money you can earn by making the purchases you were going to make anyways, by the way of airline miles, points you can redeem for gift cards, or just a check back in dollars from rewards.  Once you see the rewards add up you could be tempted to make even more purchases just to earn rewards, but if you are not able to pay the credit card bill, that interest would far outweigh what you would earn in rewards.

Living Beyond Your Means

Whether you have too much house, driving nice cars, or just plain spending too much money, if you are living beyond your means in what you can afford, then you will go broke in no time trying to keep up the act that you have more than you do.  Now is the time to make that correction so you can still give yourself a chance to reduce expenses and free up money each month so that you can put that towards more important aspects of your finances, such as your future.

Putting Off Saving for Your Future

Speaking of saving for your future, the longer you put this off then the less likely you will be able to even keep up a glimmer of your current lifestyle as you will struggle to get by when you do decide to walk away from work, if you even can at all.  If you’re not already or even are due a boost, then your work 401k account is a great place to start, especially if your company offers matching contributions, as that would be leaving free money on the table if you are not taking full advantage.

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