Taking financial shortcuts may seem intelligent at the time, especially if you need to save money in any way possible. However, in most cases looking for shortcuts can end up costing you more money in the long run. Here is a look at five occasions where taking financial shortcuts is a huge mistake.
1. Liability Insurance
Too many businesses are casual towards liability insurance. Instead of doing everything possible to get liability coverage, they will neglect this aspect of their insurance plans. For example, if you are running a business as a small contractor, it is almost certain that you will need liability insurance. Any number of incidents could take place when your team is working at a job. If a worker gets injured while doing a construction job for you, they could sue you and say the injury was due to poor working conditions. In such a situation, being without liability insurance could cost you tens of thousands of dollars.
2. Skimping on Health Insurance
Getting the cheapest possible health insurance plan possible may seem a smart idea at the time, but it can often back fire in spectacular ways. Imagine that you get the cheapest plan, but then get into an accident a few months later. This accident could result in a few days or a week of in hospital care. With the cheapest plan, most of this time at the hospital would have to be paid out of pocket.
While you saved a bit on your monthly premiums, you will end up spending an extra few thousand dollars in out of pocket payments.
3. Car Insurance
Driving without car insurance, or too little car insurance, can be hugely detrimental to your financial future. The monetary expenses involved with a car accident (car repairs, medical bills, insurance claims, lawyer expenses) can be enormous. Get a car insurance plan with plenty of coverage, not just the cheapest policy you can find online.
4. Delaying Bill Payments
Not paying a particular bill when it is due can be tempting, especially if you think you can use the money for other expenses/purposes. However, this will end up costing you more money in the long run. Late bills can add up, and before you know it you will need to pay an extra $20 or $30 on top of the original bill.
Try your best to pay all bills, taxes, and business/personal expenses on time. If you can manage to delay a payment without paying a late fee, that is great. In all other cases, make the payment as soon as possible.
5. Pushing Back Student Loan Payments
Those student loans are not going anywhere. Some people think that saving money the first few years they work is better than making consistent student loan payments. This is a mistake. If you avoid your student loans for too long, you could find yourself in default. Unlike other debts, student loans are never wiped off, even with bankruptcy. Speak to your student loan providers, and work out a budget that ensures you are never off track. Make monthly payments, never miss a month, and try to pay off the loans in bulk whenever you get an injection of cash through work bonuses.
It is important to consider the long term repercussions of your decisions, especially when finances are involved. Saving a few dollars here and there may seem like a good idea at the time, but it rarely pans out that way. Often times the money saving techniques that individuals and businesses employ end up costing them even more.
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