When we think of common financial errors that people make, our minds likely go to things such as impulse purchases and poor budgeting. However, many people think they are making the correct moves with their money, when in reality they are actually costing themselves significantly with these very moves, or are at least inhibiting their ability to make even more money. Here are some mistakes that cost people thousands of dollars a year.
Poor Savings Account Management
Some people think that the answer to frugal living is to simply build their savings account as high as possible and let the money sit. While it is good to save, you also must make your money work for you while you are not using it. I recommend either making low-risk investments with this money instead or at least making sure you are getting a solid interest rate.
Paying Credit Cards Individually
While it seems like a no-brainer to pay your credit cards each month, paying your cards individually could be costing you more in APR compared to alternatives. Websites such as AmOne will offer you a loan that can be used to pay off all of your credit cards in one bill. With the APR on the loan likely being much lower in total than your individual cards, this is a nice credit cheat to save you money.
Purchasing a New Car
There is really no reason to ever buy a new car, regardless of whether you can afford the down payment or the subsequent monthly payments. This is because cars are depreciating assets that lose a disproportionate chunk of their value in the first year of ownership alone.
This means it would literally be smarter to buy a car that is a year old rather than a new car. Around 25% of the car’s value could already be gone with little to no difference in its overall performance.