Making enough money to live comfortably can be hard; saving and wisely spending that money can be just as hard. It is important to recognize what you are doing wrong with your money that may lead you into more debt than you can handle.
The first of the top three mistakes people often make that end up with debt is believing in “good debt.” Many people think that mortgage debt or student loans are always considered to be good for your personal credit; and it certainly has potential to. The only problem is that this type of thinking typically leads people to believe they can take out more loans and not take paying back student loans as seriously. This effect doesn’t take long to catch up with the person; the money needed to be paid back piles up faster than you have time to think.
The second mistake that leads people down the road to debt is when you save or invest your money while you try to pay down debt. Some people believe that saving and investing is a smart money move and it is when you have the financial stability to do so. Until you have paid off major debts like a car or student loan it is important to hold off on trying to invest your money or you will soon find yourself with no money for your priority- which is your loans.
The final and most common financial mistake people make is our positive attitude. An optimistic outlook on life is crucial and can make life that much better for you. However when it comes to money it is more appropriate to have a realistic approach. People purchase things such as cars and houses with the belief that in a few years they will be making enough money to pay it off in full. In reality people either realize they cannot afford the payments after a year or so and have to sell whatever it is and settle on something they can afford. Or they do not end up making as much money as they had hoped and they end up paying the minimum monthly payments on their loans for years. The amount of interest and extra taxes you will have paid by the end of your loan is enormous and you probably would have been better off to have purchased something more in your price range in the first place.
If you can avoid these top three mistakes, then you are at a lower risk of having uncontrollable debt when you are older. It is important to recognize these mistakes and be sensible with your money.