financial mistakes

5 Financial Mistakes That Won't Hurt Your Credit Score

Dan Rafter — Thu, 23 Mar 2017 10:00:11 +0000

Certain financial mishaps can cost you dearly when it comes to your FICO credit score. Pay your credit card bill more than 30 days late, and your score can drop by 100 points. Declare bankruptcy or lose a home to foreclosure? Your score will fall by even more.

In general, lenders today consider a FICO credit score of 740 or higher to be a very good score. They consider anything over 800 to be excellent. Keeping your score in these ranges requires that you pay your bills on time each month and keep your credit card debt low.

But here's a secret about FICO scores: They don't measure all of your financial activity. It's possible to suffer a few financial setbacks, or make some money mistakes, without seeing your credit score take a dive.

Here are five financial mishaps that, though they might cause problems in your daily life, won't hurt your credit score.

1. Paying your credit card bill just a little late

You should always pay your credit card bills on time. And ideally, you should pay off your cards in full each month. But if you miss your deadline by two days or three weeks, it won't impact your credit score.

Your credit card provider will only report a payment as late to the three national credit bureaus — Experian, Equifax, and TransUnion — if you are at least 30 days late on it. As long as you pay before that 30-day deadline passes, your credit score will remain intact. (See also: How Late Payments Affect Your Credit)

Of course, this doesn't mean that you won't take a financial hit. Your credit card provider could raise your card's interest rate and levy a late fee — usually around $35 — against you.

2. Forgetting to pay your doctor's bill

Not all bills are equal in the eyes of your credit score. Pay your credit card or mortgage payment more than 30 days late, and you can expect your FICO score to plunge. Do the same with your doctor's or dentist's bill, and your credit score won't budge.

That's because medical providers don't report late payments to the credit bureaus. So paying your dentist bill 40 days late won't hurt your credit score.

Again, though, you need to be careful. Paying your medical bills late could have other financial consequences. Your medical provider might tack on additional fees to your bill if you don't pay on time. And if you put off paying that bill for too long, your medical provider might send a collections agency after you. This will be reported to the credit bureaus, and it will cause your credit score to fall.

3. Not paying your phone or utility bill on time

Your phone, electrical, gas, water, garbage, and cable bills are much like your medical ones: The providers of these services don't report to the credit bureaus. You can pay these bills late without suffering a hit to your credit score.

Again, be careful. You don't want your utility company shutting off your service or sending your late bill into collections, something that will hurt your credit score.

4. Paying your apartment rent late (usually)

It used to be that apartment rent payments were never reported to the credit bureaus. Today, that is slowly beginning to change, with some services popping up that will report on-time, and late, rental payments to credit bureaus.

But the majority of renters still don't see their monthly rent payments reported to the credit bureaus. That's bad news for renters who pay their rent on time each month; those on-time payments could boost their credit scores if they were reported. It's a better deal for those renters with a history of late payments, as these financial mistakes won't hurt their credit scores.

5. Losing a job

You might be surprised to learn that your annual income has no impact on your FICO credit score. Your credit score only tracks how well you pay your bills and manage your credit. It does not care whether you make a $1 million or $10,000 a year.

If you lose your job and your income suddenly dips, your credit score won't budge.

If your reduced income causes you to run up your credit card debt or start paying your bills late, though? That will hurt your credit score.

This article is from Dan Rafter of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

4 Reasons to Cut Yourself Some Slack Following a Financial Setback

Sarah Winfrey — Mon, 23 Jan 2017 10:00:17 +0000

So, you fell off your financial wagon. It's particularly easy to do this time of year, though financial mistakes aren't necessarily seasonal.

It's easy to beat yourself up over these things, even if you understand why your mistake happened. But what purpose does that serve? Does making yourself feel bad about a mistake actually make it less likely to happen again, or help you fix it?

Whether you messed up because you are stressed, going through a difficult time personally, or wanted to give your kids an extra-special Christmas, stop berating yourself. Still prone to indulging your shame and guilt? Here are some good reasons to let it go.

Failure Almost Always Precedes Success

While true overnight success does occasionally happen, it's often more fluke than anything else. True success — even when it looks like it comes quickly — usually happens after many rounds of failure. In fact, ultimate success may be more about perseverance than it is about talent.

Even well-known people, like Steve Jobs and Bob Dylan, faced setbacks and failures before they became successful. So, rather than being frustrated with yourself, see yourself as normal. Then, when you're ready, get up and try again and again and again until you find a way to meet your goals.

Failure Helps You Become Resilient

Being resilient means that life can knock you down, but you always get back up stronger than before. It means surviving and thriving in a world that often doesn't give you what you need or want. Some people seem to have this characteristic in spades, but the rest of us have to develop it.

Failure is one way to become more resilient. As you weather failures, you learn how to deal with them and with yourself. You will learn how to let life's disappointments wash over you, and then how to step out again once they're done.

If you've failed financially, whether your fall was spectacular or quiet, remember that each failure makes you a little more resilient, and then determine to get yourself back on your feet, no matter what.

Failure Invites Creativity

When we fail, it means that the solution we used to try to solve whatever problem stands before us didn't work, and so we have to figure something else out and try again. When we do this, we are exercising our creative muscles, because we are coming up with multiple ways to solve the same problem.

Look at your financial failure as the problem to be solved. Whether you want to save more, spend less, pay off a debt faster, or something else, failure means that the plan you're currently using is not one that is working for you. So take a deep breath and start brainstorming. Think of other ways to achieve your goals, even if they seem a little crazy right now.

Once you have a list of ideas, pick one to try next. For instance, if you struggle to save an emergency fund, consider using an app that saves for you automatically. If you want to spend less on drinks after work, come up with alternate activities to try with your coworkers. Most problems have a solution; you just have to find the one that works best for you.

Failure Teaches Us

If nothing else, failure often teaches us. Not only does it show us what does not work to solve a problem, but it also teaches us about ourselves. Failure can show us our limitations, it can reveal our resiliency, and it can tell us a lot regarding how we feel about ourselves.

There is a lot of focus on learning from failure as part of the pathway to success and, while that can definitely be true, learning from failure can also redefine success. Let's say you want to save up enough money for a luxury car. You're diligent about putting away what you can, until Christmas comes around. Then, you see all sorts of awesome gifts you want to give to the people in your life. To buy them, you will have to dip into your savings… and you do it without a second thought.

Sure, you may feel like you failed. After all, you didn't reach your goal. And you may have learned that you need to make your savings less accessible, so you can't dip into them so easily. But you also may have learned that you care more about people than you do about cars, and so you may choose to redefine success from "saving enough for a luxury car" to "having plenty saved to buy luxurious Christmas gifts."

Whatever failure has to teach you, stop beating yourself up and learn it!

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This article is from Sarah Winfrey of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Best Money Tips: Financial Mistakes That Will Haunt You Forever

Amy Lu — Fri, 14 Oct 2016 09:31:22 +0000

Welcome to Wise Bread's Best Money Tips Roundup! Today we found articles on financial decisions that will haunt you forever, sneaky ways to save hundreds when you sell your car, and how to make money on YouTube.

Best Money Tips: 6 Mistakes That Can KO Your Finances

Amy Lu — Fri, 16 Sep 2016 09:30:28 +0000

Welcome to Wise Bread's Best Money Tips Roundup! Today we found articles on mistakes that can knock out your finances, ways to use Airbnb like a pro, and things that incredibly happy people do.

Best Money Tips: How to Recover From Big Financial Mistakes

Amy Lu — Fri, 15 Jan 2016 20:00:03 +0000

Welcome to Wise Bread's Best Money Tips Roundup! Today we found ways to recover from major financial mistakes, how to afford an amazing trip this year, and home and auto maintenance tasks that people often forget.

Best Money Tips: Common Retirement Planning Mistakes

Amy Lu — Wed, 12 Nov 2014 20:00:10 +0000

Welcome to Wise Bread's Best Money Tips Roundup! Today we found some very cool articles on common retirement planning mistakes, amazing ways to use balloons, and stocking your medicine cabinet for less.

What Is Your Financial Kryptonite (and How to Conquer It)

Mardee Handler — Fri, 20 Jun 2014 11:00:06 +0000

Do you worry about keeping up with the Joneses? One way or another, we all battle some sort of financial demon we'd be better off without. What's your personal financial weakness — and how can you conquer it? (See also: 10 Financial Mistakes to Stop Making in 2014)

Sucker for the Sale

Stocking up on sale products that are staples in your family's cupboards is a prudent savings strategy — why not buy a couple of bottles of mustard at the beginning of barbeque season if the store is offering them at a deep discount? But do you find yourself tempted to buy things — groceries, clothing, garden supplies, or hair products — just because they're on sale?

To avoid sale-induced buyer's remorse, you may want to ask yourself a few questions before reaching for your wallet:

Would I buy this product if it weren't on sale?
Will I — or other family members — use it, wear it, or eat it?
Will I — or other family members — notice or care if I try a new brand because it's cheaper than what we normally buy? One brand of kidney beans may be interchangeable with the next, but what about socks? Do we like what we like, or are we open to change?
Is the sale price significantly lower than the normal price? (This is a particularly good one for groceries; often the sale price is mere pennies lower than the normal price.)

Never Enough Shoes

Do you have an Emelda Marcos affinity for shoes? Or baseball hats, sunglasses, ties, scarves, eye shadow…? You get the picture. Some people can't pass up their shopping weakness. It's as if the shoes, hats, sunglasses, and makeup call their name when they pass that section of the store. If you're flush with cash, no issue. If not, buying your favorite temptation can become one.

Slow the impulse by thinking through the purchase. Will this pair of shoes complete more than a few outfits? Are they really comfortable, or will I wear them once before they accumulate dust in the closet? Can I afford them?

Another strategy is to take inventory before heading to the mall. If you know that you need a new pair of black flats, great! Happy hunting. If you see three pair of black flats already taking up space on your shoe rack, you may want to have a little pre-mall talk with yourself… something along the lines of "no more black flats — no matter how cute they are, or how deep the discount!"

Shopping is all about choices; make wise ones that you won't regret. There is such a thing as having enough shoes.

Buying in Bulk for the Sake of Buying in Bulk

Do you find yourself drawn to buying things in bulk because you are convinced it's a better value? It may be — but only if you use what you buy. Warehouse stores often package popular grocery products like chips, nutrition bars, and sports drinks, for example, in variety packs. But let's face it: If you always wind up with the seven bags of onion-flavored potato chips at the end of the box because nobody in the family is willing to eat them, is it really a bargain? (See also: 15 Things You Should Buy at Costco)

Warehouse stores indeed offer great values — but be an informed consumer to maximize your buying power. Know your per-unit prices to make sure you're getting as good a deal as you think you are.

Falling for "Once-a-Year" Sales

No offense to mattress stores, but they are famous for their "once-a-year" sales events. Yet, somehow, each month, they come up with a clever new name for a new sale. Sure, different manufacturers and models might be featured during each promotion, but don't fall prey to the pressure of having to hurry and buy now — before these never-seen-before-or-again prices — disappear.

If you ever watch TV, you can't help but notice the super special deals on cars this month. Or next month. Or the month after that.

Big-ticket purchases should be carefully researched to avoid expensive mistakes and buyer's remorse. Buy a new mattress, car, or other big-ticket item when you need one — and after you've had the chance to read reviews, take enough test drives, and comparison shop. Don't place the timing of these purchases in the hands of the advertisers who can lure you into believing that now is your once-a-year opportunity to get a good deal.

Waiting for "Later" to Save

Many people think setting aside money as savings is what you do with "extra" funds. How many of us have "extra" funds at the end of our paychecks? Make a savings plan part of your mandatory monthly expenses, and watch your cushion fund grow over time. Start with a small amount ($25 per paycheck, or whatever figure you feel won't crimp your grocery budget) or a percentage of your paycheck, and gradually increase it incrementally over time.

Personal finance expert Jean Chatzy offers a retirement nest egg calculator that can help you determine the amount of money you need to set aside for a comfortable retirement dependent on your current age, income and over factors.

Buy Now; Pay Later

Do you find yourself afflicted with the "can't hardly" syndrome? As in, I can't hardly wait until I can afford to buy this new leather jacket, so I'll just charge it and worry about paying for it later? Short-term gratification can result in long-term pain.

Purchases made on credit cards aren't "free." You still have to pay for them at the end of the credit card cycle. Paying the required minimum each month results in huge interest charges, snowballing the balance and increasing your debt load. Bankrate estimates the average credit card interest rate to be 15.6% for variable rate credit cards, but many fixed rate card charge much higher rates, many over 22% on unpaid balances. Accumulating debt, hoping for the day that your finances will improve is venturing into dangerous territory.

Responsible use of credit cards can be a prudent way to manage cash flow — and collect rewards (airline miles, hotel points, cash back, etc.). But they are not meant to cover purchases you can't afford.

Of course on the flip side, there are people who are so afraid of accumulating credit card debt that they use only cash, debit cards, or checks. But the only way to build credit (which everyone needs to qualify for rent, mortgage, car leases, or or other loans) is to use credit.

Fear of Investing

Handing over your money to someone else to manage for you is scary stuff. But knowledge is power. Become an informed investor and let your money work for you. Part of that education process is finding an investment advisor that you trust. Together, you can work as a team to grow your fortune, take risks within your comfort level, and plan for a financially comfortable retirement. (See also: Begin Your Investing Career Right With Some Mutual Fund Basics)

What's your personal financial kryptonite? Please tell us how you combat it in comments!

This article is from Mardee Handler of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

7 Decisions That Seem OK Now, but Might Ruin Your Finances Later

Mikey Rox — Wed, 14 May 2014 08:12:28 +0000

No matter how hard they try, some people can't get out of the financial hole they've created. This might be due to financial circumstances beyond their control, such as a job loss or medical debt. But a lot of times, financial worries are the direct result of poor choices.

Some decisions can have disastrous financial consequences, but there are ways to avert these setbacks. Before you can make a smart money move, however, you have to recognize bad ones. (See also: Our Worst Financial Mistakes)

1. Cosigning a Loan

Regardless of whether it's your child or your sibling, cosigning a loan can be financial (and credit) suicide.

As a cosigner, you're not a silent partner in the deal. From a lender's standpoint, you're just as responsible for the loan. The primary signer may vow to pay the loan on time and promise to protect your credit history, but there are never any guarantees. If this person defaults, you'll have to repay the debt, or else suffer the financial and credit consequences.

2. Marrying Poorly

It's easy to overlook financial warning signs when you're in love and planning a marriage. However, before you walk down the aisle, it's important to determine whether your partner is a financial match.

If your partner is irresponsible with money, this could not only set you back financially, it could also strain your marriage. It might take longer to buy a house or start a family; and if the majority of your partner's money goes toward debt, you might cover more than your fair share of household expenses, which can be burdensome and frustrating. (See also: 7 Reasons Why You Shouldn't Get Married If You're in Debt)

Have a candid financial discussion with your partner. Your finances don't have to be perfect. But if you know what you're dealing with, and if both of you are on the same page, you can work together to improve your finances. This way, there are no surprises after tying the knot.

3. Delaying 401(k) Contributions

Many employees have the option of enrolling in an employer-sponsored retirement plan. If you're given this option, you owe it to yourself to consider the possibility. Regrettably, some people put off retirement planning for as long as they can. But the longer you wait, the less you'll have when you're ready to leave the workforce.

For example, a 20-year-old who contributes $5,000 annually to her retirement plan can amass about $2.2 million by age 65. However, if she waits until 40 to start saving and contributes $5,000 annually until retirement, she would only have $430,000 in the account by age 65. This is based on an average 8% return. Don't wait.

4. Living Beyond Your Means

Buying a house is the so-called American dream. But you shouldn't break the bank or overextend yourself to achieve this dream. Too often, homebuyers become overly excited and fall in love with houses that are beyond reach.

You might be able to afford a house on paper. But even if a lender says you qualify for a certain amount, you need to evaluate your other monthly expenses. For example, you might pay a lot for health insurance, auto insurance, day care, or have other expenses that don't appear on your credit report.

There's nothing wrong with getting the dream, just make sure you can afford the dream. If you end up house poor, there'll be little cash for savings and extras.

4. Using Credit Cards as an Extension of Income

Having a credit card with a $10,000 credit line doesn't mean you have an extra $10,000 to spend this year — unless you can afford to pay off the card.

Credit cards are safer when used for emergencies, or when you're able to pay off charges. Unfortunately, some people think of credit cards as their "I-can-buy-whatever-I-want-card." They might charge entertainment, clothes, and other basic needs — without any type of plan to pay off this debt. Credit card balances can accumulate quickly, and once you add in interest, it might take years to pay off balances.

5. Not Building an Emergency Savings Account

You might feel as if you have a lifetime to worry about saving money. However, a financial crisis can happen to anyone, regardless of age. Don't think that you're invincible. If you don't build a cash reserve, you might rely on credit cards whenever you need cash. And if you charge an expensive house or car repair to a high-interest credit card, you may have difficulty paying down the balance.

To build your savings, set aside 10% of your check each pay period. For this to happen, make adjustments in other areas. Can you lower your entertainment budget or reduce miscellaneous spending? Or maybe you can save on transportation and groceries. (See also: 101 Ways to Save Money Around the House)

7. Quitting Your Job Prematurely

You might be eager to quit your job once your home-based business grows. However, quitting your job before you're ready can have serious financial consequences. There are highs and lows when running a business. And if you don't prepare for the lows, you may not have cash in the bank to survive hard times.

Only quit your job if you have an adequate cash reserve, perhaps six or eight months. And only leave your job if the amount you're bringing in can cover your bills and provide a surplus. This way, you don't have to close shop if you lose one or two clients.

Did you make a bad decision that set you back financially? What was it? How did you handle it? Let me know in the comments below.

This article is from Mikey Rox of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

10 Financial Mistakes to Stop Making in 2014

Mikey Rox — Fri, 10 Jan 2014 10:48:10 +0000

While 2013 might not have been as much of a financial whirlwind as what we've seen in the past, it seems as if our ability to be frugal, manage our own money, and grow our portfolios is as haphazard as ever. (See also: Money Management Beyond the Budget)

Even in the wake of an abundance of information and education on the subject of personal finance, people continue to be plagued by heavy debt, low earning potential, and what seems to be a lot of misplaced energy when it comes to financial activity.

The good news is that avoiding these mistakes is simple.

It doesn't take a degree in economics to learn how to be frugal and smart about our own wallets and pocketbooks, even in a time when financial uncertainty is front-and-center on a weekly, if not daily, basis.

Regardless of our country's political and economic situation, this is still a place where you can succeed, and avoiding the following errors will set you up to do so in 2014. (See also: Financial Moves to Make in the New Year)

1. Stop Using Credit to Pay for Non-Essentials

Of course, if you pay your balance every month, you can take advantage of credit card rewards programs. But if you can't, or if you want to budget carefully and avoid impulse buys, put away the card, and use cash. (See also: 12 Habits of Responsible Credit Card Users)

2. Stop Procrastinating on Your Taxes

If you don't have your ducks in a row for your 2013 taxes, it's a little late now. However, you can be ready and prepared for when things come around next year to make sure you get what you're owed in a return.

Keep an envelope with receipts of all tax-deductible expenses for 2014; basically anything for your business or anything that comes out of your pocket for work-related expenses or your home, if you have a mortgage.

For this year's tax return, keep a folder of all tax-related documents from employers, banks, etc, so you have everything you need to process your return. (See also: Tax Document Checklist)

3. Stop Wasting Money on Unnecessary Protection Plans

Extended warranties, protection plans, and extra insurances are usually unnecessary. If you buy a new washer and it breaks after the year-long manufacturer's warranty runs out, just call a local repairman. He'll probably fix it for a lot less than what the extended warranty would have cost.

4. Stop Deferring Home Maintenance

Although home prices are still gaining slowly, the housing market is likely to improve in 2014. That means that any equity you can put into your home will help improve its value, even if it's just cosmetic. (See also: Home Renovations That Pay for Themselves)

5. Stop Waiting to Buy a House

If you're looking to buy a house but have been putting it off, don't wait too much longer. After dropping to historic lows, interest rates are inching up again and are likely to continue doing so in 2014, making buying a house more difficult to afford.

6. Stop Forgetting to Pay Yourself First

Don't wait for your income to increase to put money into savings. If you treat your savings account like that, it'll never see a dime of contribution. Instead, curb your spending and prioritize at least a modest contribution to your savings account on a regular basis.

7. Stop Avoiding Retirement Savings

A lot of people (especially those in their 20s and early 30s) are content to completely ignore the topic of long-term savings and retirement planning. Keep in mind that the younger you start saving and planning for retirement, the easier it'll be on your cash flow.

If you start in your mid-20s, a weekly contribution to a low-risk mutual fund, 401k or IRA of around $20 is more than enough. (See also: Retirement Planning If You're Under 30)

8. Stop Spending Too Much on Entertainment

Entertainment is important, and you shouldn't starve yourself of fun and down time.

But if you've got a subscription to Netflix and Hulu Plus to go along with the Ancestry.com account you've never used and the premium subscription to Spotify, it's time to cut back.

Pick one or two that you actually use and enjoy, then get your cancellation on. (See also: How to Save Money on Entertainment)

9. Stop Going Into to Debt for Education

Mike Rowe will tell you, a traditional college experience is not necessary or right for everyone. If you're planning to go into an exorbitant amount of debt for continuing your education, you need to weigh the cost against what the degree can eventually get you in terms of a paycheck.

That's not to say that college is bad or always the wrong choice, but choose how you invest in your education carefully. (See also: Learning Without the High Cost of Higher Education)

10. Stop Thinking Paycheck-to-Paycheck

It's fine to have a short-term budget and a weekly idea of what you make and spend, but too often this leads to a paycheck-to-paycheck kind of mentality, where you have money going out as quickly as it comes in.

Take the time to have a forward-thinking approach to your budget and finances that leaves room for both the present, the future and the unforeseen. In other words, don't neglect good financial planning just because you have "enough to get by."

Making 2014 a Good Year

If you're able to avoid the pitfalls, you can make 2014 a good year in terms of your personal finances. Often managing your money is more about avoiding mistakes and being consistent than it is about being a brilliant economist. Make sure you commit to saving, avoid non-essential debt, and think long-term.

It'll almost certainly make a difference if you weren't doing those things in 2013.

What personal finance mistakes are you committed to stopping in 2014? Please tell us in comments.

This article is from Mikey Rox of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

10 Small Mistakes That Can Ruin Your Finances

Mikey Rox — Wed, 25 Dec 2013 10:49:28 +0000

As far as money goes, you may feel that you're on the right track. But even if you work hard and strive to make smart financial decisions, it only takes one or two small mistakes to ruin your good thing. (See also: Our Worst Financial Mistakes)

1. Underestimating Your Insurance Needs

Whether you're buying health insurance, renter's insurance, or auto insurance, it pays to have adequate coverage. Some people choose policies with the least amount of coverage to lower their premiums. This is financially beneficial on a monthly basis, but without sufficient coverage, you could easily deplete your savings replacing belongings or covering the cost of auto repairs or medical expenses.

Work with an insurance broker or financial planner to determine your insurance needs and then purchase adequate coverage for yourself and family. (See also: How Much Life Insurance Do You Need?)

2. Saving Too Little

A few hundred dollars in your savings account comes in handy when you need an auto repair or cash for another small, unexpected expense. Unfortunately, a small savings account may not provide enough cash to cover major financial setbacks, such as a job loss. And without cash to pay your bills, you could lose your house and car.

Building a 12-month cash reserve might be a stretch, but if you can establish a three- to six-month cash reserve, this might carry you until the financial situation improves. (See also: Best Online Savings Accounts)

3. Ignoring Your Partner's Money Behavior

If you're in a relationship and thinking about tying the knot, do not ignore iffy money behavior. Your partner may shop excessively and leave bills unopened, or maybe you suspect that he or she has bad credit. Just know that these issues could affect your financial future. (See also: Money Questions That Couples Should Ask)

If you get married (or move in with someone) and then discover your partner is bad with money, you could end up covering more than your fair share of household expenses. And depending on whether you share a checking or savings account, your partner could squander money, leaving you with nothing.

4. Staying in a Dead End Job

You may like your boss, your coworkers, and the company. But if you're stuck in a dead end job, you'll eventually hit a financial plateau.

The decision to stay in your current position may not ruin your finances today. But as the cost-of-living increases — and your income remains the same — you could start relying on credit cards or dipping into your savings account to make ends meet. (See also: Career Changes You Can Make Today)

5. Carrying a Balance on Your Credit Card

This seemingly small mistake can cost you big. Not only will you pay interest on the credit card month after month, but the more you owe the higher your minimum payments. This creates financial problems if minimum payments are too much for your budget, and you might miss a payment or two.

Your credit card company will then charge a late fee, and if you're more than 60 days late on a credit card payment, the company can increase your interest rate. This lateness could negatively impact your interest rate on future loans and credit cards, resulting in higher financing costs. (See also: 5 Ways to Wipe out Your Credit Card Balance)

6. Paying the Mortgage Late

If you have a long history of on-time mortgage payments, you may view a single late payment as a small mistake that won't damage your credit score. However, a 30-day late mortgage payment has a huge impact on scores. And the higher your credit score, the bigger the hit.

There are no hard and fast rules regarding how many points you'll lose, but being 30 or more days late can knock 80 to 100 points off your score.

7. Failing to Maintain a Budget

Maybe you don't have the patience to sit down and develop a spending plan. Then again, maybe you feel that budgets are pointless — as long as there's enough to pay the bills; to each his own. Understand, however, that this small mistake can hurt your finances.

Budgets are designed to keep your money on track, and when you don't have a budget, there's a greater chance that you'll overspend each month. And when you overspend, you increase the likelihood of going in the hole. Lack of a budget can also affect your savings plan. Those who don't budget tend to spend first and save later. (See also: How to Build Your First Budget)

8. Doing Business With a Handshake

Whether you're lending money to friends or family, or providing a service, skipping a formal contract can be disastrous to your personal finances.

Contracts outline the terms of a loan or service agreement, such as compensation. These essentially serve as a protection, ensuring you receive what's owed.

If you're working with friends and family, you may skip the formality and rely on trust. But without anything in writing, your friend or family member may choose not to pay up. And depending on how much you have on the line, this breach can hit your pocket hard. A contract, however, gives you the option to take legal action. (See also: A Quick Guide to Contracts and Agreements)

9. Oversharing on Social Media

You may see nothing wrong with partying and hanging out with friends. But if you're documenting your every move on social media, you can end up in hot water when applying for jobs.

Nowadays, more and more employers are turning to social media to assess whether a job applicant is a right match for a company. It takes more than skills, education, and experience to land a job — you also need a good reputation. (See also: How to Avoid Social Media Slip-Ups at Work)

10. Cosigning a Loan for Family or Friends

You undoubtedly worked hard for your high credit score; don't let anyone guilt you into cosigning a loan. Agreeing to cosign a loan can help someone get the financing they need. And if this person pays the loan as agreed, everything can work out fine. Still, you can't ignore the possibility of default, at which time you become responsible for any outstanding balance — and the potential hit to your credit rating.

Any other small mistakes that balloon into financial disasters? Share them in comments!

This article is from Mikey Rox of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Ask the Readers: What's the Worst Money Mistake You've Ever Made?

Ashley Jacobs — Tue, 25 Jun 2013 10:36:31 +0000

Editor's Note: Congratulations to NJ, Diane, and Courtney for winning this week's contest!

Two weeks ago, we asked about the best money move you've ever made. This week, we'd like to jump to the other end of the spectrum.

What's the worst money mistake you've ever made? What did you do to recover — or simply plow on — after the stumble? What lessons did you learn from the experience?

Tell us about your worst money mistake and we'll enter you in a drawing to win a $20 Amazon Gift Card!

Win 1 of 3 $20 Amazon Gift Cards

We're doing three giveaways — here's how you can win!

Mandatory Entry:

Post your answer in the comments below. One commenter will win a $20 Amazon Gift Card!

For extra entries:

You can tweet about our giveaway for an extra entry. Also, our Facebook fans can get an extra entry too! Use our Rafflecopter widget for your chance to win one of the other two Amazon Gift Cards:

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If you're inspired to write a whole blog post OR you have a photo on flickr to share, please link to it in the comments or tweet it.

Giveaway Rules:

Contest ends Monday, July 1st at 11:59 pm Pacific. Winners will be announced after July 1st on the original post. Winners will also be contacted via email.
You can enter all three drawings — once by leaving a comment, once by liking our Facebook update, and once by tweeting.
This promotion is in no way sponsored, endorsed or administered, or associated with Facebook.
You must be 18 and US resident to enter. Void where prohibited.

Good Luck!

Tell us about your worst money mistake and we'll enter you in a drawing to win a $20 Amazon Gift Card!

This article is from Ashley Jacobs of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Best Money Tips: 21 Money Mistakes to Avoid

Amy Lu — Tue, 11 Sep 2012 09:48:43 +0000

Welcome to Wise Bread's Best Money Tips Roundup! Today we found some great articles on money mistakes to avoid, apps to help you save at the supermarket, and tasty tailgating recipes.

Common Money-Saving Mistakes That Can Cost Big Bucks

Dealnews — Mon, 27 Aug 2012 10:24:40 +0000

Thrifty shoppers are always looking for ways to save money whenever possible, whether by cutting weekly or monthly spending, or by stretching your dollar through sales and coupons. But take heed, because some common efforts to save actually result in wasting money. Changing the way you shop, switching to a different financial service, and more — all under the guise of saving — can often be more detrimental than you might think. Instead, think twice and avoid these common pitfalls. (See also: 10 Things You Do to Save Money That End Up Costing You More)

Switching Banks

Why You Think It Saves Money: "Why am I paying all these bank account fees? I'm going to switch banks for a free checking account and more ATMs."

How You Can Overspend: Despite last year's fervor for Bank Transfer Day, switching banks can be costly. You can easily incur overdraft fees from un-posted or pre-written checks and from transitioning automatic bill payments and direct deposits. New deposit requirements or availability policies can result in low-balance fees while you learn how to maintain "free" checking accounts.

Smarter Saving: Find a bank that offers free checking with no requirements and a ready-made bank "switch kit." Keep your old checking account open for several months until you are certain all automatic payments and checks have cleared.

Spending for Rewards

Why You Think It Saves Money: "I get cash back for things I buy anyway, so put it on the credit card."

How You Can Overspend: According to a recent Nilson Report, average monthly spending on a non-rewards credit card totaled $465; with rewards, it reached $890. Clearly, it's easy to feel compelled to spend more when you think that you're earning rewards. But be careful, balances carried over can quickly eclipse rewards as you'll have to pay off interest on your principle balance. Personal finance experts warn, also, that mental accounting weakens with credit card spending. You'll likely have a harder time keeping track of what you're charging than if you were paying for everything in cash.

Smarter Saving: Stick to your shopping budget and always pay off credit card balances before their due date. For rotating rewards categories, spend only in those higher-paying categories (for example, 5% on groceries vs. 1% on gas). Search for a reward credit card with no rewards expiration dates and no annual fees.

Sharing Your Max Monthly Payment

Why You Think It Saves Money: "The salesman will stick to my monthly payment budget if I tell him what it is."

How You Can Overspend: Rather than offering you the best price for an item (paid for in installments, like a car or loan), salesmen often try to bloat the package cost so that it reaches (or goes slightly over) your max budget. If they know you're willing to spend a certain amount each month, you can bet they won't opt to undersell you.

Smarter Saving: Stay focused on cutting the overall price of your purchase so that you'll end up with a lower monthly payment. Don't let salespeople pack any extras into your plan.

Shopping at Warehouse Clubs

Why You Think It Saves Money: "Everybody knows that buying bulk results in a lower cost per unit."

How You Can Overspend: Not every item at a warehouse club like Sam's or BJ's Wholesale is a great deal; many are bundled and packaged specifically for the warehouse clubs. So even though you're buying a cellophane-wrapped crateload of regular-size items that appears to be cheaper overall, you may not be saving much per unit in the end. Instead, you've succumbed to an expensive impulse buy that you might not actually use completely.

Smarter Saving: Know your grocery store's regular and sale prices, as well as the package sizes of items you buy in bulk at warehouse clubs. Then, do the math to compare the unit price to confirm savings. Make a list of only those warehouse items that save you money and stick to it.

Outlet Shopping

Why You Think It Saves Money: "They sell last season's brand names at a lower price."

How You Can Overspend: Not everything at the outlets is of the same quality you'd find at a full-price department stores. In fact, manufacturers often produce cheaper goods specifically for outlet stores. Moreover, there are plenty of outlet stores online, and many of them will frequently offer additional promotions that beat the savings of shopping at the traditional, brick and mortar outlets.

Smarter Saving: Be sure to compare outlet prices with department store prices, and learn the differences between designer or brand name items. When considering an item, look at the fit, stitching, fabrication, and embellishments, as this is where manufacturers tend to cut costs on producing outlet goods. At department stores, you'd do well to shop end-of-season clearance sales and can save a bundle with stacking store coupons.

Using a Prepaid Debit Card

Why You Think It Saves Money: "My paycheck gets deposited directly onto the card so I can automatically use it and avoid bank fees!"

How You Can Overspend: The ads makes prepaid debit cards sound easy, but don't fall prey to their marketing without understanding the swipe/usage or reload fees. These can end up costing more than a "free" checking account with a debit card.

Smarter Saving: Read the fine print on these offers and be sure to read through the fee chart. You should consider a free checking account with no requirements instead; it will help you learn to budget your money and track spending better.

The trick is not to act impulsively when employing new ways to save money. Think carefully about the actual costs of your purchases and savings attempts, especially if "saving" costs you upfront.

This article is from Dealnews of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

5 Things to Never Keep in Your Wallet

Tisha Tolar — Wed, 08 Aug 2012 10:36:41 +0000

I lost my wallet at the mall the other day. I was paying my bill at the Hallmark card store, and at my next stop in Bath and Body Works, I had to borrow $24 and some change from my 10 year old daughter. My wallet was gone, and I had no recollection of what happened in the two minutes it took me to walk from one store into the next. (See also: 10 Things You Should Do Immediately After Losing Your Wallet)

I am a personal finance writer, creating hundreds of articles a year on the topic, including tips for preventing financial meltdowns. Yet here I was in the mall, poking through trash cans convinced some jerk took the cash and maybe the credit cards, and ditched the evidence. As all the hassles of what it would take to get back my identity flowed through my head, the only thing I really could not push out of my mind was how stupid I was. If anyone should know better about financial protection, it should be me. I was such a failure.

I didn’t have an updated list of credit card or contact information. My Social Security card was inside the wallet. Every credit card/debit card I own was in the wallet along with receipts for the purchases I had been making. I haven’t felt so inadequate in a long time — I mean, I warn people for a living, yet what I practice is not what it is I preach.

Despite my despair at being so careless, the story has a happy ending. A nice woman returned my wallet to the nearest department store and reported her find to mall security. Thankfully everything was intact, and I was even able to call my hero of the day to personally say thank you.

However, my good karma that day does not negate my reckless financial behavior. So I am here to confess publicly my disregard for my own advice about wallet safety and add some additional tips about what to remove from your wallet to help avoid financial ruin.

Social Security Card and Birth Certificate

You may have needed this information for some specific purpose and just never took them back out of your wallet, purse, or briefcase, even though you see the documents every time you are looking for something else. Take out such personal information immediately, and file it in a safe at home. Someone with access to this information can essentially do anything you can do in your name, such as open a credit card.

Receipts

While store receipts may not have all of the data one would need to use your credit, debit card, or personal identity, they could provide just enough details for an experienced crook to figure out the rest. If you keep receipts for other reasons, clean them out of your wallet and your vehicle on a regular basis. Dispose of them by shredding them into pieces before they hit the garbage can.

Every Credit Card You Own

You never want to be without access to some kind of money in the event your wallet is stolen. Unlike me, you should only carry one credit card with you for emergency purposes and leave the rest at home. Write down the contact information and card number for each card you do carry, and file it in a safe place so you can easily report the card missing if your wallet is taken. If the thief has access to all of your credit and bank cards, you are basically a sitting duck and will have a mountain of hassle in front of you to get things back to normal.

Spare House Keys

If someone has access to your wallet, there is a strong likelihood your personal identification will lead a thief right to your home. A spare house key is an invitation to steal more. A thief can assume you are still at the mall searching for your lost wallet and may be inclined to go see what good stuff they can get from your house. Not only will you have safety concerns, you’ll have to act fast to change locks and increase security at your home while at the same time trying to resolve your other lost wallet issues.

Your PIN Codes

Every card provider tells you to select a password that is easy to remember. Still, some people find they have to write down the information and keep it in their wallets next to their bank cards for easy access. This may be helpful to you when you need to use the ATM, but you can say goodbye to your bank account if you give the same details to the con artist that stole your wallet. Store your password as a phone number in your locked mobile phone or work hard at memorizing the PIN for the card you use most.

This article is from Tisha Tolar of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

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Ask the Readers: What's the Worst Money Mistake You've Ever Made?

Win 1 of 3 $20 Amazon Gift Cards

Mandatory Entry:

For extra entries:

Giveaway Rules:

Best Money Tips: 21 Money Mistakes to Avoid

Top 5 Articles

Other Essential Reading

Common Money-Saving Mistakes That Can Cost Big Bucks

Switching Banks

Spending for Rewards

Sharing Your Max Monthly Payment

Shopping at Warehouse Clubs

Outlet Shopping

Using a Prepaid Debit Card

5 Things to Never Keep in Your Wallet