An Overview

Common Debt Mistakes That We Need to Avoid – The reasons people have debt problems are as different as the people who go into debt. Some people spend recklessly, while others have good intentions but can’t manage to follow the budget they set. Understanding the many reasons people go into debt can help you avoid doing making the same mistakes.

• Co-signing a loan
  Do not co-sign a loan unless you are prepared to pay the loan back in full. By co-signing a loan you are agreeing to be responsible for the entire debt. If the borrower defaults, or misses even one payment, it will be you the lender goes after. The lender can even liquidate your assets, including your home, to satisfy the loan.

• Ignoring your gut feelings
  People who ignore their gut feelings or instincts often end up making purchases they can’t afford or don’t need. Walk away, cancel the deal, or put the item back on the shelf if you sense a purchase is unwise, or a deal is shady. Make sure you know and exorcise your rights as a consumer. Don’t be pressured into making a hasty decision.

• Buying the latest toys
  The stores are filled with ‘toys’ that profess to make your life better. The trouble is they all cost money and many people go into serious debt buying things they have convinced themselves are necessities.

• Not researching contracts
  Contracts are legal documents that can bind you to conditions that may cause you and your family financial hardship. It is important to read all contracts thoroughly before signing anything, regardless of who is asking you to sign. Review the document carefully and ask questions about anything you do not fully understand. Add clauses you believe are necessary and cross out those you do not agree with – make sure you and the salesperson initial all the changes.

• Keeping up with the Joneses
  There will always be people who have things that are bigger, better or brighter than what you have. Perhaps you need to ask yourself, who exactly are you trying to impress and why?

• Dollar dribbling
  Little purchase add up – there are so many little expenses in our lives that slip through our spending radar. Without a budget and a control on spending, your money can evaporate. The trick is to prepare a budget and stick to it. Start by tracking your spending for a month to see where it goes. Next, set a budget and track your spending. Set yourself up for success by avoiding places you tend to spend money carelessly, such as the mall.

Once you are in the budget frame of mind, you will recognize many areas of your own spending habits, that can be improved. While it might be a bit of a challenge at first, learning to avoid debt mistakes and using a budget to create a secure financial future for you and your family, is well worth the effort.