Wednesday, May 25 2022

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No one is immune to financial mistakes, whether it’s missing a credit card payment or accidentally spending and blowing your budget.

Some errors, however, are more serious than others and may be more difficult to correct. Avoiding these big mistakes is crucial to protecting your stability, but you need to know what they are to protect yourself.

Finance guru Dave Ramsey identified one such big mistake and issued a strong warning to his followers about it. In fact, Ramsey described this mistake as akin to “dropping an atomic bomb on your finances.”

The Big Mistake That Dave Ramsey Says Could Ruin Your Financial Life

So what is the big mistake that Ramsey identified and urged people to avoid? It’s buying more homes than you can afford.

As Ramsey’s blog explains, taking on a bigger mortgage to buy a more expensive home than you expected is like dropping a bomb on your financial life, because the large monthly payments you’ll end up taking on can destroy your ability to do other important things. with your money.

“You’ll wipe out all your other financial goals (say goodbye to the vacation you’ve planned),” Ramsey’s blog warns. “You may even struggle to pay your bills and put food on the table. That’s not what you want. When life happens, you need some wiggle room in your budget. !”

Is the stretch to buy a house really that bad?

In warning against buying an overpriced home, Ramsey is right. There are a few big reasons why recovering from this mistake is so hard.

Above all, when you take out a mortgage, you agree to repay it over a long period of time. If you’ve borrowed more than you can comfortably repay, you’ll be stuck with your high payments for decades. During this whole time, you may struggle to cover your expenses, which will cause you a lot of unnecessary stress and leave you without funds to do important things like building up an emergency fund or saving for retirement.

If you have borrowed more than you are comfortable with, you also run a greater risk of foreclosure. Even a minor interruption in your income could prevent you from meeting your big mortgage bills. And it would be more difficult to save enough money in an emergency fund to pay your monthly housing costs, because your emergency fund would have to be much larger to cover them.

It’s also hard to fix your mistake because the transaction costs are huge when you sell a house and it can take a long time to find a buyer. If you regret your purchase, you may not be able to quickly sell your home for enough to pay off your loan and cover closing costs and realtor fees.

You don’t want to be stuck with a home that keeps you from making your budget work, so be sure to follow Ramsey’s advice: Figure out how much home you can comfortably afford and stick to your budget even if your bank agrees. to lend you more.

A Historic Opportunity to Save Potentially Thousands of Dollars on Your Mortgage

Chances are interest rates won’t stay at multi-decade lows much longer. That’s why it’s crucial to act today, whether you want to refinance and lower your mortgage payments or are ready to pull the trigger on buying a new home.

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