The last two years have been a roller coaster ride for global commerce. From spending to saving, investments to expenses, the entire world has been thrown around with very little financial relief. Consumers have had to curb their spending, businesses have had to trim away excesses, and some of the world’s biggest companies have required assistance from government divisions and taxpayers.
Yet despite the economic chaos, some people end up making the same spending mistakes over and over again. Purchases are still racked up recklessly on limitless credit cards, houses are still purchased without enough for a deposit, and cars are still purchased on exploitative and ridiculous financial plans. For all the talk of financial education and changed spending, very little action has occurred.
We’ve identified the top four spending errors endemic amongst all consumers, businesses, and investors. The easiest way to change behavior is to acknowledge it, and hopefully those with financial troubles won’t go out and panic, but will see what they’re doing wrong, acknowledge it, and take steps to change it.
1.Not using credit.
There’s an ill-informed belief amongst some people that credit is the source of all financial problems. While loans and borrowed money do make up the bulk of financial problems, blaming the source certainly isn’t the right way to fight the problem.
When used responsibly, credit is great. It gives investors a source of capital while still allowing them to reinvest their own money. When used intelligently, it allows consumers to purchase items through long-term payments, preserving their own cash. Credit is great when used intelligently, and is only a financial problem when used recklessly.
2.Agreeing to lengthy finance terms.
Financing a car or other major purchase can be a good idea at times. It allows buyers to build their credit rating, gives the seller an assurance of payment ability, and spreads payments over a period that’s favorable to the buyer. However, long-term financing isn’t always a good thing. Payment plans that go on for years can be restricting and entrapping – not just in terms of excess payments, but in terms of a limited lifestyle. By all means, finance purchases, but ensure you’re not spreading them out too far.
3.Jumping to debt conclusions.
Not every major debt situation ends in bankruptcy. While borrowers are often quick to jump to conclusions regarding their financial future, the reality is that there are a wide range of options out there for relief. IVAs – Individual Voluntary Agreements – are a form of debt management that allows borrowers to avoid bankruptcy and still pay off their loans. While IVA debt solutions aren’t for everyone, they’re a great alternative to bankruptcy for professionals and businesspeople. Before you jump to conclusions about bankruptcy, seek out IVA advice and get an idea of the alternatives that are available.
4.Relying on credit too much.
Remember, credit isn’t necessarily a bad thing. There’s nothing evil about a credit card, and there’s certainly nothing stupid about taking out a mortgage to buy a home. However, when debt becomes the only option for purchasing things, you’ve got to start worrying. Smart spending isn’t about exclusively using debt or savings, but about balancing them intelligently. Instead of relying entirely on credit, weigh up purchases one-by-one according to their value, utility, and influence on your credit rating.