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Avoiding Financial Mistakes

piggy bankFinancial mistakes are a part of learning and growing up. Sadly, they can be difficult lessons to learn.
The best way to deal with financial mistakes is to prevent them from happening in the first place. Below are several ways that you can help prevent major financial mistakes in your life.

Save a little money every month
Create an emergency fund with enough money to sustain your lifestyle for 3 months. This may sound like a lot of money, but by putting a little money aside every month, you will reach your goal before you know it and be prepared for life’s unexpected emergencies. A great way to make the most of your savings is through high-interest online savings accounts.

Do not buy a house you cannot afford
Many people are lured into buying a home that they can technically afford, but realistically cannot. When considering a home, you need to be aware of the taxes, maintenance issues, and other expenses of running a household, such as gas, electricity and other utilities. When purchasing a home, make sure you buy a home that allows you to still live a comfortable life. You don’t want all of your expendable income going into your home each month.

Pay off your credit cards every month
If you cannot pay off your credit cards every month, you are spending too much money. Credit cards have extremely high interest rates and can quickly become overwhelming if you do not stay on top of your monthly credit card spending.

Pay down high-interest debt first
Many people make the mistake of paying off low-interest loans first. If you have any extra money to put toward your debt, consider paying off debt that carries a higher interest rate on outstanding balances, such as credit cards.  By paying off these high-interest accounts sooner, you will save yourself more money in the long run.

Live within your means
This isn’t as hard as it sounds. To live within your means, it is a good idea to create a budget and stick to it. Start by writing down how much money you make in a month. Then subtract expenses that must be paid every month, like your mortgage/rent, childcare, utilities, food, gas, credit cards, phone, etc. With the money that’s left over, set a small amount aside for savings and determine how you would like to spend the rest of your money every month (entertainment, shopping, dining out, traveling, etc). It is important to distinguish wants from needs when determining your monthly budget. Once you have your budget, stick to it.

Consult a bankruptcy lawyer
If you do not know how to deal with the debt that you have, it is a good idea to consult an experienced bankruptcy attorney (see How to Find a Bankruptcy Lawyer). A bankruptcy lawyer should not only be aware of the various types of bankruptcy available to you (see What Type of Bankruptcy Should I File?), but be able to advise you on the best way to manage your debt.