Five personal finance trends to avoid!

A couple of weeks ago on the blog, we talked about five habits to help you with your personal finances. This week, we will be covering five trends and habits you should avoid.

These bad habits have found their way into many American homes, causing stress and poor finances. Read on to see these bad habits and find out how you can break or avoid them.

1. Payday loans. We will herald this point ‘till the cows come home: NEVER TAKE OUT A PAYDAY LOAN! We have no problem saying payday lenders are just legal versions of loan sharks. Their terms are nothing short of predatory, and the average APR on a payday loan is 400%. We also wrote an entire article on the dangers of payday loans here.

If you are in need of money and do not have an emergency savings to fall back on, instead look to take out a short-term loan with your credit union. We can provide you with reasonable terms and rates because we are here to help you out of a bind, not trap you in a cycle of debt.

If you already have a payday loan, talk to us about taking out a Consolidation Loan. It can help get you out of the trap with the payday lender and pay back your loan at a normal rate and pace.

2. Cryptocurrency. Cryptocurrency was the hot topic when it hit an all-time high of $20,000 in late 2017. It was touted as the next big thing, the new currency of the world. Even Facebook made their own cryptocurrency called Libra. The reality is, the currency only reached this peak because of speculative trading, and the value has since plummeted. It still has not recovered.

The cryptocurrency market is too volatile and the risk too high. If you are looking for a large return on your money, look into investing in stocks, a high yield savings account, or even real estate. All of these are sound investments compared to cryptocurrency.

3. Relying on credit cards. We have talked a lot about credit cards on the blog. When used correctly, they are a valuable tool for building your credit score. Unfortunately, credit cards often lead to debt. In fact, the average American is over $8,000 in credit card debt. This debt can be crippling and tough to dig out of.

If you are struggling with credit card debt, look into taking out a Consolidation Loan. A Consolidation Loan can combine all of your credit card debt into one loan at a lower interest rate, making it easier to pay off. You shouldn’t be scared of using a credit card, instead learn how to wield it as a financial tool, rather than let the debt rule your life; budgeting helps immensely with this.

4. Not following a budget. In 2019, a survey showed only 67% of Americans use a budget. This number is scary, everyone should be budgeting! A simple 50/30/20 budget can help keep you on track during your day to day and give you a guide when making major financial decisions like buying a new car or saving for a house. At the very least, take time to track your spending. This can help you see where you tend to overspend and it can also help you catch incorrect charges on your card, saving you money.

5. Lacking emergency preparedness. An emergency savings account is essential to having healthy personal finances. As of this year, only 41% of Americans would be able to cover a $1,000 emergency with their savings. These emergencies are an inevitable part of life, and they range from a car repair to being laid off unexpectedly. An emergency savings will help you face these events without having to take out a loan or dip into retirement funds.

We recommend saving three months’ worth of pay for a comfortable savings. This doesn’t need to be done all at once. Putting aside a small amount of money every paycheck for a year or two will help build your savings.