A lot of people have experienced difficult situations when they urgently needed extra financial help. For instance, you’ve spent a fortune on Christmas presents to all the friends and relatives. Or you’ve splurged too much on product advertising. In the case of any financial emergency, the most common misstep is maxing out the credit cards.
Everybody can make debt mistakes. The crucial thing here is what you should do once it happened. In this article, we will share with you the tips of three personal finance experts on what debt mistakes they’ve experienced and how they managed to overcome them.
Also check 4 worst financial mistakes.
Minimum Payment Mistake
The first example of debt misstep is from Grayson. He has his own blog where he shares his journey and how he managed to get out of $75,000 debt. He eagerly writes about what he has already learned about saving money, paying off the debts, and investing.
His story starts in 2006 when he graduated from college and the real life started. He admits that adulthood is connected not only with bigger paychecks but also with bigger expenses. And often young people realize this simple truth when it’s too late and they are in debts from head to foot.
Grayson was the same presumptuous young man when one day he decided to purchase a jet ski. He thought it would be a nice present. Besides, it would only cost him $70 a month… So why not?
All in all, the total purchase cost him more than $10,000. The minimum payments that he regularly did over the next three years happened to repay only $3500 of the total cost. More than that, after the three-year teaser period had finished, the monthly payments jumped to $200. As a result, Grayson realized he couldn’t afford this new toy, so he had to sell it.
To sum up this story, remember that the minimum payment isn’t always enough to get you out of debt.
Student Loan Mistake
Another example of widespread debt mistake is from Robert Farrington. Robert has his own blog where he writes about student loan debt and debt missteps students often make while studying. His blog is considered to be one of the best and most popular blogs among young people. He points out that the main debt mistake is an abuse of student loan borrowing. Thus, a lot of people can relate to this mistake.
For example, you are middle-aged now and still have quite a large sum of student loan debt from your bachelor’s or master’s programs. The problem of these people is that they borrowed much more than they actually needed while being students.
There is nothing bad in being self-confident and thinking you can get a better return by investing some of this money. But it can lead to unfavorable results like a snowball of debts that are constantly growing.
To sum up this story, remember that it isn’t always a good idea to borrow more money, even if it’s offered at a low-interest rate.
Big-Ticket Purchase Mistake
JD Roth, the personal finance expert, decided to share with us the last widespread mistake so many people can make (and even apply for secured personal loans for this). It was not a mistake he made himself but the one he came across during his coast-to-coast trip in the USA. Traveling in North Carolina, JD Roth saw the Biltmore Estate, which is considered the biggest home in the US having 250 rooms and 179,000 square feet.
Bonus: Check the best place to buy sports tickets.
The most striking fact in this story is that George Washington Vanderbilt II built the house paying $5 million out of his $7 million inheritance. In other words, the house cost him three-quarters of his possessions.
The statistics show that the average new house that is constructed now is about 2,600 square feet. In the 1970s, new houses were only about 1,600 square feet, which means the houses are getting bigger and bigger.
To sum up this story, ask yourself what you really need before making your next big-ticket purchase like a car or a house. Is bigger purchase going to make you happier?