9 Steps to a Financial Meltdown

9 Steps to a Financial Meltdown

Most readers on this site are entrepreneurs or business owners. For those just starting out, or for those who would like to help their employees to take steps to secure their financial futures, this is a great article to provide the DO NOT tips to avoid financial disaster. Or at the very least, it can make the difference between happy financially secure employees or those who work to eat and do not see a bright financial future. That creates turnover.

#9 Live to spend

If you ever spend time around a rich person, in their everyday lives you would be surprised at how they watch their pennies. While you may be splurging every morning on a $5 Super Mocha Frappuccino, the well off person might just order straight coffee. Or, more likely they will be at a completely different and lower priced coffee shop. Consider that the $5 drink would add up to around $1,250 during the year.

If you just take an extra moment or two while shopping for almost everything, perhaps the store brand or a different packaging option would save you money. These savings add up over time.

#8 Those small by-the-month subscriptions

These really add up fast. How many cable channels, music services, game apps, password apps, or other seemingly inconsequential expenses are you using? Signing up for many of these is a single-click and a couple of minutes. The problem is, even if you almost never use them later, the charges just keep coming. They’re small, and unless you go through your many bank statements or phone bills line by line every month, it is easy to spend hundreds of dollars every year for services you no longer use.

On the larger side, buying things with monthly payments (even Amazon is offering this now) can become addictive. Each purchase may just have 6 to 12 payments, but these add up.

#7 Buying with credit cards

These days it’s not just cards, as with Apple Pay, Google Pay, Samsung Pay, and other apps, you can just swipe your phone and the deal is done. It is just so easy to not think about what you have for available cash and make the purchase. You figure that you will just pay it this month, but often that is not the case.

#6 Car crazy

From buying brand new with 60 months or longer notes to the depreciation you lose in value the moment you drive it off the lot, many people spend more than they should to have a brand new car. Even if they are more conservative in their purchase, maybe even buying used, are they buying more car than they need. The costs for insurance may be higher, as well as for fuel and maintenance for a larger vehicle than necessary.

#5 Too much house

Some would call this “house poor.” In so many ways, buying a home that is larger than your family’s needs will cost you a great deal of money down the road. From taxes to utilities, insurance, and maintenance, it is amazing how many thousands of dollars you can run through just to have that extra few hundred square feet.

#4 Tapping your home equity

There are always online ads and direct mail marketing pieces targeting high equity homeowners. It is great business for them to make HELOC (Home Equity Line of Credit) loans, as they are low default rates. It is easy to make a high dollar purchase decision when it is easy to get a loan against equity, but then the payments go on for years.

#3 Not investing in retirement

The other way to say this is reliance upon Social Security for your retirement. According to the Social Security Administration, the average monthly benefit paid in August 2021 was $1,437.55. Probably you should consider if you could stop working tomorrow and live the lifestyle you want for that monthly amount. Make a plan for retirement and save toward it.

#2 Using savings to pay down debt

Adding to savings is still preferable to deducting from savings to pay debt. Even if the interest rates on your debt are higher than you retirement account interest, it is better to always be making a positive difference in savings. Pay down debt as best you can but not with savings.


While considering the different mistakes to avoid in order to prevent financial meltdown, think positively as well about constant improvement of your financial situation. Research is great, but pulling together a plan, and possibly even financing part of it out of tax savings can be a great start. Ask the advice of a tax expert and planner.


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