7. Buying a Brand New Car- Did you know the moment you drive your new car off the lot, it can depreciate by as much as 11%? I bought a new car in 2013 and looking back, I wish I would have bought a year-old car because I could have saved so much money. If you can afford to purchase new, with little to no financing, and you aren’t worried about your car losing value, then go for it. I’m sure Nick and I will probably buy new cars again in the future; we will just make sure we can pay for it in cash.
6. Using Credit Cards For Everyday Purchases- This is one that I was guilty of a few years ago. I was using my credit card for everything. Even though I paid it off at the end of every month, I still was always playing catch-up and felt like everytime I got paid it went directly to my bill. It’s always way too easy to start thinking of your credit line as money you actually have, which is not true. Now Nick and I have one credit card that we’ll use for a large purchase, like airline tickets or hotel stays, and then pay it off right away.
5. Buying Too Much House- Like I mentioned before, houses come with additional expenses that some people forget to plan for. If you buy a house that you barely afford, you are taking a big risk. I like to call it ‘house poor.’ You have a house, but can’t afford to have furniture or to do anything other than sit in your house. I would highly suggest using a mortgage calculator to see what you and your family can comfortably afford before buying.
4. Leasing a Car- This is such a bad idea; you’re not investing in anything. You’re basically renting a car and then, once the lease is over, you have nothing to show for it.
3. Financing Vacations- Vacations are great, but taking out a loan just to go on vacation is really irresponsible. If you can’t afford to fly your whole family to Disneyworld for a week, how about you drive a few hours to a camp site? Or even camping in your backyard. When you finance a vacation that $5,000 becomes $10,000 before you know it.
2. Buying a House without an emergency fund- What is an emergency fund? It’s 3-6 months of your expenses saved for a rainy day. When you buy a house, that means any problem that arises is something you have to pay for. A new roof: $10,000; new a/c unit: $3,000, etc. If you don’t have an emergency fund, you could be in a lot of trouble when the unexpected comes up.
1. Not saving for retirement- Why aren’t people doing this? Let’s do some math real quick. If you are 25 and are making $40,000 annually, you can start putting 10% of your income into your 401K and by the time you’re 65, you will have over a million dollars in your 401K!
What should I add to my list? Comment and let me know!