5 Best Ways to Absolutely Destroy your Personal Finances

Submitted by G.E. Miller on Sunday, 5 July 2009 5 Comments

Most of the advice you’ll find on 20somethingfinance is geared towards best practices when it comes to your personal finances. Not this one, my friends. Through personal experience and witnessing worst practices from others, I’ve compiled a list of the 5 best ways to destroy your personal finances. Learn what to do through the avoidance of these practices.

1. Borrowing from the Credit Card Company (and Holding a Balance)

I’ve used credit cards to help establish a credit history and to gain from rewards. Used in these ways, credit cards can be part of a healthy financial picture. Used in just about any other way, they can wreck your financial house of cards. If you carry a balance from month to month, there’s a lot of things you can assume - first of which is that you aren’t saving any money. If you are saving money, you’re doing so foolishly. There are few places that you can get a return (and none without high risk) of over the typical 12%+ that credit card companies charge on balances.

2. Buying More House than you Can Afford

As a general rule of thumb, you should not spend more than 30% of your take home income on your housing. With both houses that I’ve owned, I’ve pushed to about 30%, and when my wife lost her job in January, we were definitely concerned about what a prolonged layoff might mean for our ability to make our house payments without significantly cutting into our savings. If you can, I’d recommend keeping your housing expenses to below 25% of your take home income.

3. Not Funding an Emergency Fund

Before paying off good debt, funding your IRA and/or 401k, or saving for other long-term goals, establishing an emergency fund is essential. If you lose your job, have a serious medical complication, have to fund replacement transportation in the event of major vehicle repair, or run into other unexpected financial hardship, you need to have some cash on hand to throw yourself a lifeline. Unfortunately, those who have not run into one of these situations often think it will never happen to them. This is especially true for twenty somethings. Don’t let this happen to you.

Unlike Dave Ramsey, I don’t think it’s realistic or wise to pay off ALL of your debt before saving more than $1,000. Focus on paying off high interest debt, but when it comes to school loans and mortgages, paying all of those off first before adding to your emergency savings is not a good idea. Once you’ve paid off high interest debt, then shoot for a minimum of six months of expenses, but preferably 8 months to a year’s worth.

4. Wasting your Money on School

Getting a solid BA or BS degree from a reputable university would be difficult to argue as a bad investment. Sadly, this can often lead people astray as they take this fact and convince themselves that additional degrees are going to be the ultimate path to financial riches. Convincing yourself that a second undergrad degree (unless you need it to completely change careers) or staying in school an extra year or two can be downright devestating for your financing.

But surely, MBA’s an other advanced degrees must be a good investment, right? After running the math, I’m not so sure. If I were to leave my job to pursue an MBA at the two most reputable public universities in my state of residence, I would shell out at least $80K for the degree. Additionally, I’d be giving up significantly more in salary over the two years. I figure that it would take me almost two decades to pay back my investment and make up for the lost salary, and that’s only if I were to find a higher paying, higher stress job. That entire time, I’d have the burden of that debt on my shoulders. I’m going to pass for now.

5. Rolling the Dice

No, I’m not referring to gambling, although that certainly would make a top 10 version of this list. I’m referring to not paying for your basic insurances: home, auto, medical, and life. This is another one of those ‘you don’t know how important it is until something bad happens’ necessities. We’ve all seen someone lose their homes, their vehicles, or their savings due to not having their basic insurances covered. ‘It’ CAN happen to you. Don’t roll the dice.

To the Readers:

• What have you learned from your financial mistakes?
• What would your top 5 be?

Why exercise?

Now winter's here, has your exercise routine taken a back seat in favour of sitting huddled on the sofa with a hot water bottle and a bag of chips? It's easy to find excuses to avoid exercise - ‘There's not enough time in the day', ‘I'm too cold and tired to get to the gym', ‘I'll do it tomorrow' - and it can be easy to forget the reasons why you were going to the gym in the first place. Read on to remind yourself why that fitness regimen was a good idea after all.

Lose weight

When exercise is combined with a balanced diet, it can help you slim down and keep weight off in the long-term. It raises your metabolic rate (the speed at which your body burns energy) and helps build muscle. The more muscle you have, the more kiloujoules your body burns - and the sooner you'll fit back into those skinny jeans.

Improve cardiovascular health

Your heart is a muscle, and, as with other muscles, regular exercise helps to strengthen it, so it can pump blood more efficiently and with less effort, delivering nutrients and oxygen where they're needed in the body. Exercise also lowers blood pressure and helps clear fatty deposits out of the arteries, preventing blood clots that can lead to a heart attack or stroke.

Sleep better

Exercising the right amount at the right time of day improves your quality of sleep and makes you feel more awake during the day. Avoid too much activity within the three hours before bedtime as it will stimulate your brain and raise your body temperature, making it more difficult to drop off, but after that time, your body temperature drops lower than if you hadn't exercised, improving sleep.

Manage stress

By increasing blood flow to the brain, exercise helps you think more clearly and work through problems more efficiently, reducing stress. Many people find exercise can be an outlet for frustration and stress, easing these negative emotions. On a more physical level, exercise helps relax the muscles in your neck and shoulders that tighten during stressful times, leading to tension headaches.

Prevent osteoporosis

Weight-bearing exercise, including walking, running and stair climbing cause the muscles and tendons to pull on your bones, stimulating the cells to produce more bone. This leads to stronger, denser bones, and less of a risk of developing osteoporosis in later life.

Build confidence

As well as making you slimmer and more toned, exercise helps improve your posture. Your clothes will look better on you and you'll generally feel fitter and healthier. Plus, knowing that you have managed to achieve your exercise goals when you look in the mirror or step on the scales is a real self-esteem boost.

Reduce diabetes risk

The body stores sugar in the muscles and burns it off as energy during exercise. A lack of activity means the muscles have no room left to store sugars from food, so this goes straight into the bloodstream, sending your blood sugar levels soaring, which can lead to type-2 diabetes. Exercise also helps reduce body fat, which makes your cells more resistant to insulin - the hormone that helps regulate the amount of glucose in the blood.

Improve mood

Exercise releases ‘feel-good' chemicals called endorphins into your blood, giving a feeling of happiness and increasing your overall sense of wellbeing. So what are you waiting for?