3 Major Money Mistakes that Can Cost You

Written By:

Avoid Costly Money Mistakes

Everyone makes mistakes, or so my mother tells me. But when it comes to making mistakes with your money, it can cost you.

Avoid expensive mishaps by being in the know, particularly when it comes to your credit score, home loan and rainy day fund:

Ignoring Your Credit Score

Your credit score has never been as important as it is now. It’s not just about qualifying for the best interest rates and terms on credit cards, auto loans, private student loans and home loans anymore. It’s about qualifying at all.

For example, just a couple months ago, you needed a 580 credit score to qualify for home financing. Now, your score needs to be north of 620. And that’s just to get your foot in the door. To qualify for the best mortgage interest rates and terms, you’ll need a 720, according to Bob Walters, chief economist for Quicken Loans.

Another common money misstep is credit score procrastination. If you wait until you need to borrow money to get up to speed on your credit, it may be too late. Making big improvements to your credit score can take many months depending on your situation.

Luckily, it’s never been easier to access your credit. With new sites like Quizzle.com, you can get your hands on your credit report and score for free, no strings attached. Plus, credit improvement tools are now available online to help you make improvements so you’re in a good spot should you need to apply for financing.

Neglecting Your Home Loan

If you had $100,000 to invest, would you monitor your investment? Would you check in regularly to make sure your money is in the right place? Would you consult with a financial adviser to update you about market moves and new investment opportunities?

If you’re like most Americans, your home is your largest investment. So treat it that way! If you’re not into monitoring daily mortgage rates, find a trusted home loan expert who will do it for you. Or sign up for free Rate Alerts that automatically notify you when interest rates dip. Or use home loan comparison tools that will show you how your mortgage stacks up against other available loan programs.

By being in tune with your home loan, you’ll know when it’s the right time to refinance. And refinancing can potentially help you to achieve greater financial flexibility and freedom with lower monthly payments, different loan terms, high-interest debt-relief and cash-out options.

Ill-Preparing for a Rainy Day

With a national unemployment rate just under 10 percent, many Americans are learning about the importance of a rainy day fund – the hard way. A rainy day fund, also known as an emergency savings fund, is meant to protect you from financial hardship should a little rain fall in your life, like losing your job.

In 2009, the average duration of unemployment was six months, according to the Bureau of Labor Statistics. As such, it’s smart to save up money to cover at least six months worth of expenses in case you lose your job, encounter a major home or car repair, or have unexpected medical bills.

In addition, don’t assume that creditors and lenders will be empathetic in your time of need. If you don’t have an income, you’re likely not going to find anyone to extend you credit or a loan.

Smart money management requires a regular effort. There are countless tools and tips online to help you navigate the personal financial waters, but ultimately, the responsibility is yours. Dodge costly money mistakes by giving yourself a regular money check-up. And if you do make a mistake, I’m sure mom would say, “Pick yourself up, dust yourself off and try, try again.”

For more ideas on how to improve your financial health, check out Quizzle.com, where you’ll learn how to achieve your credit potential and get home loan recommendations tailored to your unique situation.

More from the QuizzleWire:

  • richard colonel

    When I had credit cards, I had a tendency to buy things which I did not really need. That got me in a pack of trouble. I paid off all credit cards. I figure that if I can’t affort an item, I don’t really need it. Or if I want it bad enough, I will save my money and then get it. The best way to enter into retirement is without credit cards.

  • http://UseofCreditCards Janice Harbin

    The real need for credit card use is for emergencies only. When buying medications (at 65 there are LOTS of medicines I must purchase), car repairs, doctor visits and tests. These “emergency charges” are then paid off with the next payment due date.

    If I cannot pay off these debts, I cannot charge more until the previous ones are paid off.

    This is legitimate uses of credit cards.

  • http://quizzleblog Julie London

    How lucky Janice is to only have one emergency happen at a time, allowing her to pay them off as they occur. Not all credit card debt is solely from overspending.

  • Patrick

    From my personal experience, almost everyone I know that has credit card debt(myself included) uses their credit card for things they want and not things they need or for an emergency. Also people that use them for things they need do so becase they never saved for a rainy day. I must agree with richard colonel when he states “save the money and then buy it”. That is what I do now. credit card will be paid off come 1 April and then it being cut up and canceled.

  • Kim

    My parents said that credit cards are a no-no because its just going to encourage me to spend on unnecessary purchases. I got a credit card and yeah they were right but at least, with the kind of trouble I got into recently, I learned how to manage my finances. It wasn’t that bad anyway. I made sure of it because I got another forewarning: my parents said they’re not going to ‘save’ me if I get intro credit card trouble.

  • Kimberly

    My fiance and I charge everything we buy. We don’t buy anything that we wouldn’t typically buy with cash, but for groceries and things, we charge it all. That way, we earn the points. And we can keep the money in savings until it is necessary. We make money on the interest in the savings account (not much) and off the points that we trade in every six months or so for over $100 in cash. Why not? It makes sense to use. AND it is building our credit.
    Credit cards are only bad if you don’t know how to properly use them.

  • George

    After having problems with credit cards myself i made a change.

    After buying anything with a credit card i immediately buy a money order and make it out to the credit card account and mail it when the statement comes in.

    This costs me 50 cents per money order, but saves $$$ in interest charges.

    I keep my credit cards now for emergency use, except an ocassional purchase as above to keep them from going “inactive”. I also want the cards to help my credit rating/availability.

    I am slowly building a nest egg so i won’t have to depend on credit cards during an emergency.

  • Johnyy doe

    When raising my twin girls from grade school up as a single parent I tried to teach them several financial things to avoid. 1. Learn the difference between NEED and WANT.
    2. Never – Ever use a dept consolidation as you are not only going into debt deeper but
    more than likely you will run up new debt and then l owen the new debt and still have
    the old debt. 3. People that borrow money do so most time because they can not manage their own money – they will do no better with yours. DO NOT LOAN MONEY.
    My ole dad use to say – you never know some completely until you deal with them financially, especially LOANS. As a young man in Germany (USAF) in the middle 1950’s
    I had to threaten comrades in arm with phyical violence (would have too!) to get my
    money back. My blood would boil when I saw someone that owed my but would not
    pay up then buy something that I could not afford!