- Never co-sign for anyone--even your mom, your kids, or your best friend. If they require a co-signer it means their credit is crap and the chances of them bailing on the loan and you having to pay it off are pretty high.
- Never loan money to anyone. Ditto the above. People who can't get credit are more than likely bad credit risks and will not pay you back and the relationship will eventually be trashed. When our kids need money we either give it to them as a gift or don't give them anything at all if we can't afford it.
- Never buy anything from a rent-to-own place. The pay off price for a basic consumer item like a TV or washer and dryer set can be four or five times the cost of buying the item in a store. People can make due with a thrift store/Craigslist item until they save up the money to buy the items they need without paying exorbitant interest rates.
- Don't buy a time share. The price is ridiculous and the contracts are super hard to get out of so you can be stuck paying annual fees FOREVER. Take the amount you would spend annually on a time share and pay for a really fabulous vacation, no strings attached.
- Never use one of those title loan/payday loan places. Interest rates are ridiculously high (like 300%-700%!) and it's a good bet that you will end up in a continual cycle of debt trying to pay off these high interest loans by getting other high interest loans.
- Avoid membership plans in almost all cases. Gym memberships are famous for being difficult to get out of, meanwhile they automatically charge your credit card every month for a service you may never use. It is better to pay the higher month-to-month fee (in cash, not with a credit card) to use a gym until you are certain you will use the service AND you have an easy to understand contract with a simple exit clause.
- Student loans can be the bane of your existence for DECADES into your future. If possible students should try to avoid loans all together by attending cheaper community colleges, doing high school/college programs which offer free tuition, applying for scholarships, and finding other ways to minimize college costs. People who take out six-figure student loans to attend a dream school at 18 years old can pay for this way into their 40s and 50s! As a side note, make sure the degree you are working towards has a reasonable chance of getting you a good paying job as student loans are not dischargable in bankruptcy.
- Don't lease a vehicle. It's best to not even get a regular loan for a vehicle and instead pay cash for a junker until you can save up enough to pay cash for a car. Paying for a loan--and interest--for the standard term of six to seven years on a car when its value is dropping like a rock is not a good investment.
- Think long and hard if you need an item that you will only use occasionally (after, of course, you have the cash to pay for the item IN FULL without a loan). Boats, RVs, second homes...there are a lot of love-to-have items that in reality you may hardly ever use. Renting these things is often a better idea.
- Get a grip on your shopping. Buying stuff just because it is on sale can get you into debt. Ditto for using credit cards to buy stuff that you can't afford. Ditto for taking out a home equity loan to go on vacation or put in a hot tub when you don't have the money to pay for these items. Retailers--both brick-and-mortar as well as online--have developed so many ways to separate you from your money so you really need to be on your guard when it comes to spending your hard-earned money.
Monday, April 23, 2018
10 Financial Situations to Avoid Like the Plague
I'm watching Judge Judy and the cases over the years have focused around money issues 90% of the time. There are several financial situations that if avoided, will make your life MUCH simpler and happier...