When it comes to personal finance, it seems that many people are not taking the right steps to keep the money that they have worked hard for. Many of us, myself included, can blow money on unnecessary expenses and justify wants as needs. But by acknowledging these traps, you can try to avoid them.

Here are some of the most dangerous traps to avoid with your personal finances.

First, make sure that you do not get caught up in large monthly payments for large assets — there is a reason I don’t have a car!

Large monthly payments such as those for an automobile loan do nothing but take away from your net worth and cars depreciate faster than the time it takes to get approved for a loan. You must budget so that you can pay off large assets as quickly as possible. You will avoid interest payments that take away from your wealth building potential by doing this.

Second, avoid saving after everything is paid.

If you pay all of your bills and only save what is left over, then you are very likely to end up saving nothing at the end of most months. People use the excuse of an unexpected expense or emergency in order to completely forgo saving any money for that month. Setting aside money to save should be the first “bill” that you pay every month. Pay yourself first!

Third, when you need to borrow money, do not leverage your assets or go to a check cashing place.

There are many financial tools that simply should not be used — think about it, do these places really have your best interest at heart? Check cashing businesses usually come with incredibly large interest rates that are never worth the expense over time. If you have any unexpected emergencies, there should be a cash fund or an emergency credit card by your side in order to take care of those. Emergency funds can make or break you! You have to make sure that you have a good standing current account where you can keep your emergency cash when needed. You should never leverage your car title or any large assets in a short-term move to get cash.

Fourth, do not believe that investing is only for the pinstriped suits on Wall Street. It’s for regular folks like you and me and is the best way to build wealth.

The concept of investing is an everyday thing that should be considered by all people. There’s a myth that you need a lot of money to invest, but that is simply not true. Now with the rise of robo advisors, you can get started with investing a small amount of money and pay a small amount of fees.

There are many other things that you can do in order to create a strong financial future for yourself, but the above list will certainly get you started on the right track.


Melanie is a freelance writer currently living in Portland, Oregon. She is passionate about education, financial literacy, and empowering people to take control of their finances. She writes about breaking up with debt, freelancing, and side hustle adventures at DearDebt.com.

Currently she puts more than 50% of her income towards debt, while living a frugal, fun life. In addition to her love of personal finance, art and music, she is also a karaoke master. Follow the adventure @DearDebtBlog.

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2 responses to “Avoid These 4 Traps When Handling Your Finances”

  1. Courtney says:

    I cannot agree more about paying yourself first! We direct deposit our savings directly into a savings account that is separate from our checking so we never “see” it. Money you don’t “see” you can’t spend!

    If it really was an emergency we could transfer money then…but only then!
    Courtney recently posted…Budget March 2015 ~ The Month of JuiceMy Profile

  2. Tre says:

    Great advice. Check cashing places should be illegal.
    Tre recently posted…The Key To Success In FreelancingMy Profile

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