Personal Finance

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PERSONAL FINANCE WITH SUZE ORMAN

Debt Mistakes to Never Make Again

We all make mistakes. What’s important is learning from them. This section teaches you strategies for dealing with debt problems you may already have, and how to steer clear of common debt mistakes in the future.

1

Never borrow more than you absolutely need.

There are some good reasons to take on debt: your education, for example, or to buy a home. But even if you are borrowing for a good reason, make it your goal to borrow the least amount possible. The less you owe, the more flexibility you have to focus on other money goals. Don’t be seduced by a lender who tells you how big a loan he can get for you. For example, let’s say you know you can buy a terrific home in a neighborhood you like, and your mortgage will be $800 a month. A mortgage lender says you can qualify for a larger mortgage, for which the monthly payment will be $1,000 a month. “Great!” you think. “We can afford a house with an extra bedroom and a renovated kitchen!” Not so fast. By opting for the less-expensive mortgage, you free up $200 a month to put toward another goal. That’s $2,400 a year you could invest in a Roth IRA for your retirement, for example. In 30 years—the typical time it takes to pay off a mortgage—the $200 a month you managed to save in your Roth IRA could be worth nearly $170,000 at an average annual rate of return of 5%!

Debt Mistakes to Never Make Again (cont.)

pg. 1

Debt Mistakes Never to Make Again

2

Don’t charge more on your credit card than you can afford to pay off in full each month.
An unpaid credit card balance is one of the worst debt mistakes. The typical interest rate charge on your unpaid balance is above 15%! That’s crazy. Limit your credit card purchases so when the bill comes you can send in a payment for the entire amount.

3

Don’t be late!
Paying your bills…...

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