The 7 biggest financial sins
Financial decisions want to be well considered. After all, wrong decisions can last for a long time. Here are 7 financial sins you should not afford.
The new TV was more expensive than planned, the additional hairdressing visit had to be easy for peace of mind and the weekly shopping was the lure too large to resist one or the other offer: Such unplanned additional expenses may put a strain on the budget, but in the end to get over.
But when it comes to running costs and larger investments, financial mistakes can hurt properly and for a long time. Financial decisions should therefore never be taken lightly and spontaneously. And a few decisions should not fall at all. Which are these?
Here are the seven biggest financial sins:
An old wisdom says: “One should not spend money that one does not have.” And even if it sounds banal, there is a lot of truth in this wisdom. Of course, it can always happen that an urgent purchase is necessary, but the money is missing.
In such a case, it is usually unavoidable to agree on an installment purchase, to use the credit line or to take out a installment loan. Basically everything on the pump to buy, but is a very bad idea.
Because the rates have to be paid and from several small installments can quickly become a decent amount. In order not to fall into the debt trap, it is therefore better to postpone purchases, which are not absolutely necessary, first of all and – quite classically – to save on them.
Savings and deposits are currently attracting little interest. Of course that’s a pity for savers. But for those in need of financing or credit, the record low interest rates are a real advantage. Because low interest rates mean lower borrowing costs.
If a borrower has some money on the high end, he should use that money to pay off current loans. This brings him the bottom line, a higher return, as if he continues to pay high lending rates, but at the same time receives hardly any interest for his savings. And in general, it can always be worthwhile considering whether current loans can not be rescheduled more cheaply.
Many a saver has some money left, but he does not know how best to invest it. So the money just stays in the checking account. Sometimes it is also parked on a passbook that was opened many years ago.
As a result, the money earned but no or only minimal interest. Therefore savers should take their time and inform themselves about possible investment products.
It does not have to be equal to a Riester pension, a fund savings plan or shares. The mere fact that the free capital is paid into a daily or fixed-term account, the saver can secure at least a small return.
It is undoubtedly important to provide privately for old age. Because only the statutory pension will not be sufficient in many cases to maintain the usual standard of living and to enjoy a relaxed retirement. It is also true that the earlier the saver starts, the lower the monthly cost of private retirement savings.
Especially with the products for retirement, the saver but should look very carefully. Because many contracts have very long terms and the investment products are not very flexible. In addition, sometimes high costs arise, which are financed by the contributions in the first years. As a result, the saver pays initially for the product, without actually build up a significant balance.
If he wants to get out of the contract prematurely, he will lose out. It is therefore important to select an investment product that, on the one hand, fits in with the current life situation and, on the other hand, can be flexibly adapted to changing living conditions if necessary.
In addition, the saver should take into account the costs and examine whether and how the capital must be taxed in old age.
The choice of investment forms and financial products is huge. For the layman, it is therefore often not easy to get an overview and select a suitable model. On the other hand, there is no financial product that is so outstanding and limited at the same time that the investor has to shut down immediately.
Instead, he should always take the time to calmly examine a facility and compare it with other offers. Besides, he should never invest in a product he does not understand. After all, he does not want to gamble his laboriously earned money lightly, but invest it safely and profitably.
It is not possible to hedge every conceivable risk. And there are insurances that are really superfluous. But there are also insurance policies that should not be waived. An example of this is the private liability insurance.
It intervenes if the policyholder causes damage to a third party. Another example is term life insurance. It only costs a few euros a month, but secures the relatives financially if something happens to the policyholder. When traveling, the foreign health insurance takes over the sometimes high cost of medical treatment and everything related to it.
There is this insurance for less than ten euros per year. Of course, which insurance makes sense always depends on your personal life situation. However, the policyholder drives well if he acts according to the super-GAU rule: The risks that would be a super-GAU and would seriously endanger his existence, he should hedge.
Of course, it is convenient to take out all insurance with the same insurer. It is even more convenient if the contracts are combined tariffs, which include several insurance policies at once. Even a combination package of telephone, mobile, Internet and television is very comfortable.
But that convenience often comes at a price. Because combined rates are rarely the cheapest option. In addition, they often contain building blocks that are actually not needed. Similarly, it is unlikely that an insurer will offer the best terms for all insurances.
And especially with insurance and telecommunications offers loyalty almost never pays off. It is therefore advisable to check in the first step which contracts are really needed. In the second step, a comparison portal can then be used to quickly find out whether a change is worthwhile.
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