8 Investment Mistakes That Will Make You Broke

house 730x350In order to insure your financial future, it is vitally important to save and invest your money. Unfortunately, many people have the wrong idea when it comes to growing their finances. Make enough mistakes and your money won’t grow, you will never have financial stability and you may never even be able to retire. We review some of the biggest mistakes people need to avoid.

1) Over-sized Primary Residence

While a primary house can be a valuable asset, it does not always make for a great investment. Some people buy a much larger house than they need with the idea that they will be able to sell the house at a later time for a larger profit. Unfortunately, larger homes also come with larger expenses. There are many things such as bills, repairs, and other home maintenance costs that are not only unavoidable, but are very large expenses that do not increase the value of your home. For example, a single homeowner living alone in a 3,000 square foot house will spend thousands of dollars extra in heating expenses every year he or she lives in that house as opposed to the bills he/she would see in a much smaller home more suited for one person. That is wasted money. Factor in other expenses like yard maintenance, home repairs, and keeping the place clean, just to name a few. Years of paying these expenses all eat into the true profits to be made of the sale of the home.

Another reason purchasing a large home can be a bad investment is liquidity. This is especially problematic when the home buyer uses all or most of his or her cash on the home purchase. If the home owner subsequently has financial problems due to loss of job or some unexpected event, it can be a real problem. Sure, the owner has valuable equity in the home, but that equity is usually not very liquid. Houses are sometimes listed on the market for years before the homeowner can sell the house and access the cash. 

Advertisement

 
Advertisement