*Picture taken from Flickr
Finding your way to financial freedom is a lot like trying to navigate your way out of a forest. You need to make sure you are heading in the right directions and ensuring that you’re not taking any wrong turns. Of course, in this forest, there are also traps that you need to avoid. These traps may send you into debt spirals or lead you to pay more than you really need to, putting unnecessary pressure on your finances. But what are these traps? Well, there are a few you need to be aware of.
The Using ‘Fake Money’ Trap
Okay, it’s not really fake, but it’s not exactly real either. What are we talking about here? Credit cards. Credit cards while useful are also incredibly dangerous because they give you a sense that you can buy anything without consequences. And, if you have a big enough limit on your card you probably can. It doesn’t matter whether you can actually afford it and if it exceeds your limit, you can just stretch it over a few other cards. The problem here is that buying on credit is just far too easy. It’s as easy as buying with actual cash. That’s why you either shouldn’t use credit cards or make sure that they’re not always on you because they are just too darn tempting.
What if you already have a large rack of debts on credit cards. Well, you may want to look at a report on debt consolidation. Debt consolidation means that you can bundle all your debt together into a package that will be far easier to pay back. As such, you won’t have to worry about it dragging you down each month like an anchor.
The Dipping Into Savings Or Worse, Your Pension Trap
Make sure you come to terms with the fact that your savings and definitely your pension is not money to spend right now. They are money funds for the future. It’s so easy to fall into the trap of thinking I'll borrow it now and pay it back later. But retirement and rainy days are never as far off as you think. Eventually, you will need the money, and if you don’t have it, then you could find yourself in serious difficulties.
The best way to deal with this is to treat the money like it’s not even yours. Forget about it, unless you need it for an actual, serious financial emergency in your life, just leave it alone.
The Bad Idea Trap
Finally, you need to watch out for the trap of thinking you’re making a smart decision for your finances and later discovering it was a bad idea. An example of this would be a get rich quick scheme. It sounds great in theory, but eventually, you’ll find you’ve spent a lot of money and haven’t made any at all. We’re not saying that you should never take risks. Risks can be great.
You do however need to consider the benefits and disadvantages carefully before you jump at the chance to make more money easily.
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