In this post, we are going to talk about 6 major money traps that everyone should avoid at all costs. If we are able to avoid these traps we will be a lot better in financial status. We can be happier, more confident, and in control of finances by avoiding at all costs these 6 money traps below:
If you ever read about Rich Dad and Poor Dad's book, you probably understand the thought of money between both dads, the poor mindset one and the rich mindset one. One of the cores of the book is how the rich love to own assets rather than liabilities. The asset is anything that can produce cash flow and give money back to you, while liabilities are those that take money out of your pocket resulting in a negative cash flow. Common liabilities are cars, vacations, shopping, eating out, subscriptions, etc. We want to buy assets that produce income for us such as business, rental properties, stock, bonds, etc.
CREDIT CARD DEBT
Paying only a minimum payment on the credit card. Every credit card company has a minimum payment that is due every single month and as long as you are paid for that amount, your account is considered in good standing. The huge trap of credit card debt is the interest rate that binds with the credit card. Trying to avoid credit card debt is the best choice in the long run.
FALLING FOR SALES
Buying something because of sale. The sale will give you tempted to buy the products or services you're not necessarily needed. The sale price is set by the retailer which final outcomes still give them more money by taking money from your pocket. The sale is just the marketing strategy just to lure you to buy more of their products. Don't fall for it.
Buying expensive cars that you are actually can't effort. Buying a brand new car might consider a trap since it will lose value about 30% in the first year and 50% in 3 years due to the depreciation curve. The car dealer will try to convince you that you can afford it since you can just pay the minimum payment every month. When you buy a car you lose the opportunity to buy the asset that can produce the dividend and value appreciation in the future. Below is the recommended list of care you should select based on your income.
NOT BUYING IN BULK
Buying in bulk actually is one of the best ways for saving money that give you an immediate return. Buying a toothpaste in bulk which you are going the need anyway in the future which the discount price might be a very good way to get your immediate return.
PAYING FOR STATUS
Paying for designer goods. This is the most trap everyone catches just to show off for status and not spend your money wisely. Buying something to signal your wealth is just a stupid thing to do. You can utilize your money buying assets that appreciate in value is the best decision you should make.