Everyone knows money mistakes can be costly, but there are some mistakes that can cost a lot more than others.
For example, failing to fully save for your children’s education might make it more expensive for them, but it’s not really painful for you. However, being late on your own debt payments can really hurt.
Here’s how some of the worst money mistakes can end up costing thousands, or even more.
1. Failing To Repay Student Loans
The absolute worst money mistake anyone can make is failing to repay their student loan debt. If you don’t make car payments, the bank repossesses the car. If you don’t pay your mortgage, the bank forecloses on your house. But if you don’t repay your student loans, the government (or bank if private loans) will come after your income – through wage garnishments, tax return offsets, and more.
Furthermore, when you don’t repay your loans on time, interest and penalties accrue. Over time, this can add thousands of dollars to your loan balance. So not only will you face a difficult time with garnishments and more, you’ll owe much more in the end.
And all this can be avoided because there are a lot of programs that can help. If you have Federal loans, you may be able to qualify for income-based repayment plans that could lower your payments. If you have private loans, you could potentially refinance and get a lower payment as well.
2. Not Having Health Insurance
Health insurance is another area that can be a very costly mistake. First, health insurance is now required and failing to have it will result in a tax penalty. This can be 20% of your income or $325, whichever is higher. That can add up to a lot of money.
Second, and potentially even more costly, is what happens if you do get injured and require medical care. The fact is, accidents happen. You could be in a car accident, or simply get sick. If you have to go to a hospital, you could be looking at thousands of dollars in bills.
An estimated 47 million people have some form of medical debt they are paying off, and it can be costly to deal with the interest and penalties, simply because you avoided a small health insurance premium.
3. Post-Graduation Entitlement Spending
Finally, many graduates indulge in a little post-graduation recognition spending, for all the work they did in school. This could involve buying a new car, new wardrobe, or even renting an expensive apartment.
However, if this post-graduation spending binge is done with debt – car loans, credit cards, etc. – it can really end up costing thousands more in the end, with nothing to show for it.
Before you jump on the bandwagon and buy expensive things after graduation, make sure you have a job, are earning a good income, and have put together a post-graduation budget.