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As summer progresses, you may want to relax. At the same time, however, it’s important not to be too lax with your finances.
After all, in today’s unusual economic climate, in which inflation remains persistently high and Interest rates make borrowing difficult., it’s easy to make money mistakes that will cost you more than they would otherwise. Fortunately, knowing what to watch for and how to manage these types of financial challenges can alleviate your financial situation.
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Watch out for these 3 costly money mistakes in June, experts say
Be sure to keep an eye out for these three costly money mistakes this month and as we head into the rest of summer:
Carry a credit card balance from month to month
With the average credit card interest rate currently above 21%, and with many card rates close to 30%, taking a credit card balance month-to-month can be particularly expensive right now. And, if you only make the minimum monthly payments, you could end up paying more interest than the actual balance on your card.
If you are faced with a situation where you are having difficulty keeping up Credit card paymentsYou might consider using a trusted provider debt relief servicenegotiating for debt forgiveness or using a debt consolidation loan to try to lower your interest rate and get a more manageable payment.
However, the ideal is to avoid this monetary mistake if you do not have an unmanageable balance.
“When you go on a summer vacation with the family or take on summer projects like fixing up your house or garden, it can be tempting to buy everything at once, put it all on your card, and deal with paying for it later. This strategy can help cover your purchases right away, but it will leave you with a hefty bill when your monthly statement is due,” says Mary Hines Droesch, director of banking and lending products for consumers, small businesses and wealth management at Bank of America.
“To avoid putting all of your purchases on your card, consider saving for big purchases over time or buying things a little at a time over the course of a few months,” adds Droesch.
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Do not compare prices before borrowing
Even if you don’t want to carry with you a credit card balance If you can avoid it, sometimes you will still need to borrow money, such as for housing, transportation, education, or another important expense.
Whatever the case, not shopping around before borrowing is a mistake, as even a small difference in interest rates can add up over time. For example, on a $400,000 mortgage, the difference between a 7% interest rate and a 6.75% interest rate is almost $24,000 in interest over 30 years.
But when shopping around before borrowing, you may want to consider factors beyond the interest rate to evaluate the total costs of the loan. For example, if you are opening a new credit card (Even if you intend to pay it in full every month), look at the interest rate, but also the other factors, such as the annual fee and credit limit.
Having a higher credit limit could tempt you to spend more, so keep that in mind during the process. That said, a higher limit can also help when it comes to keeping your credit utilization ratio low, so there is a balance you should consider.
“One of the mistakes people make is not keeping their credit utilization ratio (credit balance divided by available credit) reasonably low on revolving debt, such as credit cards. Most experts say “You should keep your revolving credit utilization below 30%,” says Marito Domingo, chief credit officer and chief financial officer at First Tech Federal Credit Union.
“If you can show that you are responsible in managing both revolving debt and installment debt, then your credit score won’t be affected as much during the summer season. Otherwise, the rate you pay on your revolving balance could increase, making it more expensive the cost of the purchases made”, adds Domingo.
Getting caught up in the moment
You may also want to avoid getting too caught up in summer fun at the expense of your financial future. After all, doing so could be a big and costly mistake.
“Summer is all about spending time outdoors in beautiful weather, so it can be hard to say no to a fun outing like a day at the beach or a concert, but it’s important to keep your long-term savings goals in mind. term,” says Julie Beckham, executive vice president and director of financial education strategy and development at Rockland Trust.
“Whether you’re saving for a new car, a down payment on a house, or tuition for the fall, don’t forget what you’re working on as an incentive to spend less right now. And if you feel like you might just forget, set up automatic transfers from your checking account to your savings account so you don’t have the opportunity to spend that money on anything else,” Beckham adds.
The bottom line
Consider making the start of summer the start of better financial habits. Instead of ending in a difficult debt situation or simply overspending when it comes to loan costs or summer excursions, think carefully about where your money goes before it gets out of hand.
