Personal Finance



Everybody makes mistakes with their money. The important thing is to keep them to a minimum. And one of the best ways to accomplish that is to learn from the mistakes of others. Here is our list of
the top mistakes young people (and even many not-so-young people) make with their money, and what you can do to avoid these mistakes in the first place.

Buying items you don’t need…and paying extra for them in interest.



Every time you have an urge to do a little “impulse buying” and you use your credit card but you don’t pay in full by the due date, you could be paying interest on that purchase for months or years to
come. Spending money for something you really don’t need can be a big waste of your money. But
you can make the matter worse, a lot worse, by putting the purchase on a credit card and paying
monthly interest charges. Research major purchases and comparison shop before you buy. Ask
yourself if you really need the item. Even better, wait a day or two, or just a few hours, to think things over rather than making a quick and costly decision you may come to regret. There are good reasons to pay for major purchases with a credit card, such as extra protections if you have problems with the items. But if you charge a purchase with a credit card instead of paying by cash, check or debit card (which automatically deducts the money from your bank account), be smart about how you repay. For example, take advantage of offers of “zero-percent interest” on credit card purchases for a certain number of months (but understand when and how interest charges could begin). And, pay the entire balance on your credit card or as much as you can to avoid or minimize interest charges, which can add up significantly. “If you pay only the minimum amount due on your credit card, you may
end up paying more in interest charges than what the item cost you to begin with,” said Janet Kincaid,
FDIC Senior Consumer Affairs Officer. Example: If you pay only the minimum payment due on
a $1,000 computer, let’s say it’s about $20 a month, your total cost at an Annual Percentage Rate of
more than 18 percent can be close to $3,000, and it will take you nearly 19 years to pay it off.

Getting too deeply in debt.



Being able to borrow allows us to buy clothes or computers, take a vacation or purchase a
home or a car. But taking on too much debt can be a problem, and each year millions of adults of all ages find themselves struggling to pay their loans, credit cards and other bills. Also recognize the warning signs of a serious debt problem. These may include borrowing money to make payments on
loans you already have, deliberately paying bills late, and putting off doctor visits or other important activities because you think you don’t have enough money. If you believe you’re
experiencing debt overload, take corrective measures. For example, try to pay off your highest
interest-rate loans (usually your credit cards) as soon as possible, even if you have higher balances on other loans. For new purchases, instead of using your credit card, try paying with cash, a check
or a debit card. “There are also reliable credit counselors you can turn to for help at little or
no cost,” added Rita Wiles Ross, an FDIC attorney. “Unfortunately, you also need to be aware that there are scams masquerading as ‘credit repair clinics’ and other companies, such as ‘debt consolidators,’ that may charge big fees for unfulfilled promises or services you can perform
on your own.”

Paying bills late or otherwise tarnishing your reputation.



Companies called credit bureaus prepare credit reports for use by lenders,employers, insurance companies, landlords and others who need to know someone’s financial reliability, based largely on each person’s track record paying bills and debts. Credit bureaus, lenders and other companies also
produce “credit scores” that attempt to summarize and evaluate a person’s credit record using a point
system. While one or two late payments on your loans or other regular commitments (such as rent
or phone bills) over a long period may not seriously damage your credit record, making a habit of it will count against you. Over time you could be charged a higher interest rate on your credit card or a loan that you really want and need. You could be turned down for a job or an apartment. It could cost
you extra when you apply for auto insurance. Your credit record will also be damaged by a bankruptcy
filing or a court order to pay money as a result of a lawsuit.

So, pay your monthly bills on time. Also, periodically review your credit reports from the nation’s three major credit bureaus — Equifax, Experian and TransUnion — to make sure their information
accurately reflects the accounts you have and your payment history, especially if you intend to
apply for credit for something important in the near future.



Not watching your expenses.

It’s very easy to overspend in some areas and take away from other priorities, including your long-term savings. Our suggestion is to try any system — ranging from a computer-based budget program to hand-written notes — that will help you keep track of your spending each month and enable you to set and stick to limits you consider appropriate. “A budget doesn’t have to be complicated, intimidating
or painful — justsomething that works for you in getting a handle on your spending,” said Kincaid.



Not saving for your future.

We know it can be tough to scrape together enough money to pay for a place to live, a car and
other expenses each month. But experts say it’s also important for young people to save money for
their long-term goals, too, including perhaps buying a home, owning a business or saving for your retirement (even though it may be 40 or 50 years away). Start by “paying yourself first.” That means even before you pay your bills each month you should put money into savings for your future. Often the simplest way is to arrange with your bank or employer to automatically transfer a certain amount



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