5 Money Mistakes That Lead to Debt
- Wednesday, March 27, 2013
Here are five common money mistakes that can quickly lead to debt. Avoid them at all costs.
1. Allowing a get-rich-quick mentality. Symptoms of a get-rich-quick mentality are evident in many of the investment schemes in the world today. Unfortunately, many Christians find themselves caught in the get-rich-quick trap before they realize what is actually happening.
Speculating on the future not only is a practice in surety, which is warned against in the Bible, but also is presumptuous, because no one can rightly predict what will happen in the country's financial markets over the next hour, much less the next few months or years. Borrowing money in order to speculate on the future is both unwise and dangerous, placing the borrower in a position of potentially losing everything if the economy turns downward.
Another danger concerning get-rich-quick schemes is that often investors know nothing or very little about the product, service, idea, system or organization in which they are being solicited to invest. Christians are particularly vulnerable to being tricked by get-rich-quick schemes, because they tend to trust people who call themselves Christian, especially if they claim to have a special revelation or direction from God. Stay with what you know and do not invest until you have completely and thoroughly investigated the product, program or company. In addition, no decision should be made hastily. Always wait until you understand the proposed opportunity, seek outside counsel and earnestly pray before making any investment decision.
2. Ignoring the advisor that God has provided. It is very dangerous for a husband or a wife to ignore the primary advisor that God has given them -- their spouse. When there is a relationship as close as a husband and wife relationship, there will be problems. Since opposites tend to attract, they may not agree on a number of things and issues. That's OK as long as they communicate and try to reach a reasonable compromise. God's Word is very specific when it comes to husband and wife relationships. God created the husband and wife to function as a single working unit, each with different but essential abilities. Without the balance that each can bring to a marriage, great errors in judgment will most likely be made.
3. Buying a home you cannot afford. Nearly every family in America dreams of owning their own home. However, many times they try to buy a home too soon after marriage or pay too much for a home and end up in financial trouble. These families often don't realize that owning the home created their financial problems because it took too large a portion of their spendable income. Because of this, inadvisable home purchases are the number one expense that leads to unmanageable debt.
The percentage of an average family's budget that should be spent on a house payment is no more than 25 percent of net spendable income (after tithes and taxes). Add to the mortgage payment the cost of property taxes, insurance, utilities, maintenance, repairs and telephone, and the percentage climbs to about 38 percent. Unfortunately many couples commit 60 percent or more of their budgets to housing and cannot handle that cost.
Too often, the biggest mistake is stretching to buy a house based upon two incomes. If a family can afford to purchase a home within their budget (budget should be based on the one income only, not on the combined incomes of husband and wife), that will protect the majority of families from future stress and perpetual debt.
4. Buying a car based on monthly payments instead of overall cost. Another common expense that leads to debt is the purchase of a new car. Quite often couples who cannot qualify to buy a home buy a new car as a compromise. This is a major debt trap for couples, especially those who have a tendency to overspend, because they are generally not concerned with the overall price of the car, just the amount of the monthly payments.
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