Making the wrong financial choices can end up costing you big time. Here are five common mistakes people make when it comes to their personal finances and tips on how you can avoid getting in those financial dilemmas.

1. Only making the minimum payments on your credit card

Carrying a credit card balance is one of the most common financial mistakes people make. Let’s say, for example, that your credit card has a $5,000 limit and a 15% interest rate. If you charge it to the limit and pay just the minimum monthly payment, it will take at least 22 years for you to pay it off.

Even worse, you’ll be paying almost $6,000 in interest by the time your debt is cleared. This means that you’ll be paying more in interest than you initially borrowed.

Avoid this financial mistake by paying off your balance in full every month. At the very least, send in more than the minimum requirement.
Save on interest by charging expenses to a no interest or low interest credit card. Use an online credit care comparison tool to find a credit card that’s right for you.

2. Underestimating the value of your home

Despite the recent drop in home prices, your house could be worth more than you realize. If you’ve lived in the same house for the past 10 years, it can be worth between 54% and 104% more than you paid for it, according to “Consumer Reports” magazine.

If you haven’t kept your homeowners insurance up to date to reflect the increase in value, you might lose all of those gains if disaster strikes. Request that your insurer reassesses the replacement cost of your home and adjusts your home insurance coverage accordingly.

3. Not reviewing your insurance policies

Your needs and possessions have undoubtedly changed over time, but are these changes reflected in your insurance coverage? For example, if you’ve purchased a pricey home theater system but haven’t updated your insurance, you’ll be losing out if it’s destroyed in a house fire.

Just because your current car insurance provider gave you the best deal last time doesn’t mean they’ll still be the best deal when it comes time to renew. Instead of automatically renewing your policy, shop around and get quotes from several other providers. You could end up saving yourself a bundle on car insurance.

4. Not setting a household budget

If you don’t track your income and regular expenditures, you might be spending more money than you can actually afford. Spending more than you earn can easily lead to a cycle of debt and borrowing. This cycle only gets worse the longer it keeps occurring.

Avoid a never-ending cycle of debt by keeping track of your spending for one month. You might be shocked at how much money you’ve spent on non-essential items.

Once you have some idea of what you’re spending, create a household budget and put everyone in your household on a spending allowance. This not only helps you to stop wasting money, but it should also give you some leftover funds to put in your savings.

5. Failing to save for retirement

Paying into retirement plans costs you money upfront, but it will cost you so much more if you don’t plan for your future. Far too many people don’t save up and are left with just minimal monthly pensions and social security payments.

Start saving when you’re young. Participate in your employer’s retirement plan, especially if it involves your employer matching your contribution.

This article was provided by, a price comparison website.

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