If you want the financial freedom without getting into debt and difficulties, it is important that you learn about the most common financial traps and how to avoid them. Credit companies and banks have their own ways of getting you hooked up on products for years, and make the most money at your expense. To help you become financially smart, five of the most common financial traps are listed below.
Hire Purchase
Of course, you will want to have a decent car to get you to work and help you explore with the kids, but some of the agreements will trap you in a deal with no opportunity to actually own the vehicle. You should understand the difference between hire purchase and car loans and make sure that your repayments get you some value other than having a car to drive. It is always better to save up than to spread your payments over years and see the value of your car reduce. You can check out more resources at Auto.Loan to learn how car finance works.
MLM Investments
You might be the risk taker, but paying money to earn money is never a clever thing. If you look at statistics, you will have a miniscule chance of earning your investment back in a reasonable time. Instead of investing in something that might work for you, make your skills more valuable for real employers.
Training Costs
Some non-MLM companies will also offer you a deal to cover your training costs and get it deducted from your salary. You will get a company car, but you will have to pay for it. Or you might not like the job after all, leave, and be left with a debt to the company for the training. Make sure that you check the small print and think your decisions through.
Tying Up Your Savings
Banks will want you to tie up your savings, but it is not always the best solution. You need to earn a substantial amount of interest to even consider this solution. The difference between fixed term and flexible saving account interests is not huge, so you might as well decide not to commit to a long term deal and have a backup fund for emergencies.
Conspicuous Consumption
We all get caught up in competition sometimes. You know, if one person got a new car in the street, others will follow. If they had new shutters installed, the neighbors will start checking out the options. If your colleague got the latest designer bag, you will want it. However, this is the easiest way of getting into debt, and you should think twice. You need to better your money and get more value from your purchases than emotional gratification.
To get smart with money, it is important that you avoid some of the most common traps companies, the society, and banks set for you. Sleep on your impulse buying triggers before you act on them, and you will have a prosperous and easy life.
