Opinion November 23, 2015 | 5:04 pm

Avoid these 5 financial pitfalls

In these tough economictimes, it is imperative to reassess your spending habits and avoid thefollowing “financial pitfalls”.


If you are alreadypaying high interest rates for personal loans, then it is a good idea not tosave money (assuming you already have an "emergency fund" of 3 to 6 months worth of expenses) until thecredit facility is fully paid off. The logic behind this is simple mathematics,in other words, it’s very uncommon for your savings to yield higher return thanthe interest rate you are already paying on a loan.

Using your Credit Cardon a Daily Basis

One of the biggestfinancial mistakes you can make is using your credit card to buy necessitygoods. Try to always pay your monthly balance in full and avoid increasing yourutilization rate. If your utilization rate (monthly balance/credit limit) isvery high, then this will more than likely affect your credit score. Ipersonally recommend not using more than 20% of your loan-to-limit ratio. Onlyuse credit cards for specific purchases that you will be able to realisticallypay off.

Unnecessary Expenses

Many people are nothappy with their current financial situation, but at the same time, they do notknow exactly where all their money is going. Each family member should keep adaily expense record (excel spreadsheet) in order to cross out any unnecessaryspending. Carefully analyze which items you can cross out of your expense list.Everybody who is merely staying “afloat” financially should seriously considerreducing unnecessary expenses. For example, avoid eating out (coffee and lunch)and instead bring your own lunch to work. You will quickly see how yourexpenses will go down in just a couple of months.


Before buying a car,make sure to know specifically for what purpose you will be using the vehicle(this will be helpful in determining which type of car is best suited for youspecific needs). Many people prefer to buy a new car due to the potential risksof purchasing a used one. Remember that even a new car depreciates in valueonce you first drive it out of the lot. It is a good idea to consult with aprofessional before purchasing a used car.

Buying Vs Renting aHouse

For many people, buyinga home is the single largest investment they will make in their lifetime. Ahouse is definitely a good long term investment and banks usually offerflexible mortgage loans. On the other hand, it would be wise to assess yourcurrent employment and financial situation before using a big portion of yourincome. Many people think that renting a house is the same thing as throwingaway their money (this is not the case). When you rent a place then you do notneed to worry about maintenance and other property taxes. Plus you will havemore cash to save and invest.

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