5 Financial Traps That Can Get You Into Trouble

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Financial difficulties span all across the board from small difficulties to major  ones that can ruin your life. There is a correlation between certain  actions that someone takes and the amount of debt they are in. It is all  too often a common thing to see older people living on social security  with extra money to spare but successful people who make a good amount  of money with nothing to spare. Once financial difficulties start, it  can be easy to keep them progressing and much harder to slow them down.  It feels like everything is piling on you and you cannot get out of the  situation you are in. There are 5 different traps that can suck you in  financially.

Leasing 

Leasing a vehicle is a major trap that people find themselves stuck in.  The problem with leasing a vehicle is that you never own any portion of  the car. You place a down payment down on the vehicle and make monthly  payments to it, however, when the lease runs up you must turn the  vehicle in and then you can lease another one. You are basically  throwing money away in this situation. It is better to purchase your  vehicle and even make payments if you have to. At least this way you are  paying towards something you will own eventually.

 

Credit and Loans

Another major financial trap that catches people is credit cards and  loans. Credit cards are a dangerous habit to form if you do not actually  have the money. A credit card allows you to make a purchase for  something without having to pay for it at that moment with the intention  that you will then pay off your balance or at least towards it. Some people become stuck and then never pay off their credit cards or become attached to them and have to continue using them. High interest rates and monthly payments will surely get you stuck.

Payday loans are good for the once or twice use but if you continue to use them you will become financially strapped. People rely on these to help them pay for something that they do not have the upfront money for. Payday loans are very easy to obtain but they carry a hefty  interest rate with them. Normally you only have a week or two to pay  them back.

 

Emergencies

Not saving any money for emergencies will get you into some trouble. It  always seems like when you do not have any money set aside, something  that can go wrong, will. You are left to then find a source of funding.

 

Retirement

Many times people do not think about saving money for retirement. It is  important to do so to be able to maintain your lifestyle later in life.  If you start saving at a young age, the money will add up.

 

Lifestyle

People run into trouble when they live a lifestyle and do not have the  proper funds to live that lifestyle. It is common to see people spending  more money than what they make. This type of lifestyle will get you  into a financial trap.

Financial traps are easy to get into and harder to get out of. It is  common to see people stuck in stressful, financial situations. Learning  and recognizing the habits that put you in a financial dilemma is the  start to freeing yourself from the debt that holds you down.

Financial Decisions to Stay Far From

If you’re not  careful with your financial decisions, you could quickly find yourself in debt and struggling to stay afloat. Managing the bills, paying the mortgage, and staying on top of your finances are always going to be  tedious and frustrating chores. However, if you make the right financial  decisions then you will always have enough money on hand to handle these expenses. Below, you will find financial decisions that you want stay far away from, so that you can keep your financial stability intact.

 

Payday loans

While short-term loans have become particularly popular in recent  years, they are a financial decision that you want to stay far away  from. Payday loans come with severely high interest rates and they have  very short-term repayment periods. This means that you will be expected  to pay off the payday loan within 2 to 4 weeks upon receiving the cash.  This is a very short-term timespan and it’s often difficult for  borrowers to manage.

 

Car leases

While a car lease can be much more affordable than actually  purchasing a car through financing, they are generally not recommended.  Car leases are short-term solutions to getting a reliable car, but you  will often have to purchase a car or renew your lease after your current  lease has expired. You do not own the vehicle and when you barely have  enough money to afford the car lease payments, it’s a negligent  financial decision.

 

Unmonitored credit card usage

Using credit cards responsibly is a great way to build your credit  score and improve your financial standing with the banks. However,  unmonitored credit card usage or over-usage of your credit cards could  build a considerable amount of debt and leave your finances in turmoil.  You need to be very careful with how you use your credit cards and how  much money you apply toward them at the end of the month. Paying the  minimum payment is a negligent decision as credit cards should always be  paid off in full if possible.

 

Committing to a substantial mortgage

When you go to the bank and you are given a preapproval on a  mortgage, you should never purchase a home that maxes out that mortgage  amount. Banks are often far too generous with the amount of money that  they approve. If you want to live in easy-going life, you should spend  far less than what the bank will approve you for on a mortgage. This  will make your monthly payments more affordable and you will have more  money left over in your budget to afford other expenses.

 

Risky investments

There are lots of ways that you can invest your money, but some of  them are more risky than others. For instance, Forex or currency trading  can be wildly profitable, but it has a very steep learning curve. Some  people tend to dive head into new things that they are excited about and  this often leads to debt and risky financial decisions. Try to control  your spending and do not jump into risky investments without weighing  the options that are available to you.