Four Financial Pitfalls And How To Avoid Them

Let’s face it, life is expensive. It costs to do almost anything, including something as small as renting a movie from Redbox or Netflix. With large expenses like house and car payments, and the smaller ones like a daily run to Starbucks, it is easy to see how a budget can quickly spiral out of control and make money tight. If you have a budget, you may be having a hard time sticking to it or it may not be taking into consideration all of your expenditures. When having enough money becomes a problem it is tempting to find a quick fix, but doing so oftentimes makes the problem worse.

Here are four financial pitfalls, and what you can do to avoid them:

•         Taking a pay day loan: the interest rate on these loans is extremely high, making it hard to break the cycle of debt. If you take out a pay day loan, you may end up paying back two or three times the amount borrowed. Most people don’t have this financial ability, and so continue to borrow just to repay. Doing this will cause your total debt to add up quickly, and make it near impossible to repay.

•         Transferring balances from card to card: while this seems like a good idea when the new card offers a lower rate, the only way to make this work is to pay off the balance before the promotional rate expires.

•         Taking equity out of your home: it is tempting to take out a second or even third mortgage on your home in order to come up with some extra cash, but doing so will only add to what you owe on your home and eat up any equity. Without an equity cushion, you will be in an unlikely position to sell your home if the need to do so arises.

•         Paying only the minimum amount due: when all you can pay is the minimum payment, you do keep the lender off your back for collection, but you make little to no headway towards full repayment. If you can pay a little more than the minimum, do so.

The best way to avoid these pitfalls is to stick to a budget. But when that is not possible, you should think about filing bankruptcy. Bankruptcy will put an end to the need to pay back your debt at high rates, and will help to free up your money so you can make your payments without problem.

For help with managing overwhelming debt, contact us at www.law-ri.com. We will help by coming up with solutions that work for you and have multiple locations to meet your needs for office visits.