We all make unfortunate financial decisions at some point in our lives. I’ve personally made a few more than I care to admit! And while we can’t always be prepared for every financial eventuality that we may face, there are many common pitfalls that we can guard ourselves against. So here are 5 “money moves” that definitely won’t pay off!
Avoid Falling for an Adjustable Rate Mortgage
Adjustable rate mortgages may seem like an attractive option at first due to the low interest rates they offer, but that doesn’t last. After a few years your interest rate will change, and you’ll have no control over where it ends up. A standard fixed-rate mortgage is a less risky and more predictable option for most people.
Avoid Getting Trapped in a Timeshare
Purchasing a timeshare may add up to more of a commitment than it appears. The market for selling and buying timeshares is all but nonexistent, meaning that it will be hard to find a buyer should you ever want to get out of your contract. And on top of that, your fees will probably go up overtime, and you may not want to keep vacationing at that exact spot. It’s a much smarter financial move to look deals on hotels or condo rentals for each trip, rather than buying into a timeshare agreement.
Avoid Purchasing for “No-Interest” Benefits
A “no interest for 90 days” deal always sounds like a great deal, but often that lures people into a false sense of security about their payments. Suddenly the 90-day intro period has expired, and all of that back interest shows up on your bill. Rather than taking that chance, opt to wait until you can pay in cash.
Avoid Taking out Payday Loans
Cash advance businesses offer service fees that may seem reasonable, but it’s the interest rates that will kill you. The average annual interest rates on payday loans are between 400-500%! Due to these astronomically high interest rates, it’s very easy for people to get trapped in a payday loan cycle, borrowing and making payments several times a year. These borrowers account for nearly 90% of payday loan accounts, according to the Center for Responsible Lending. It’s a slippery slope that should just be avoided entirely.
Avoid Paying More Money Towards Low-Interest Debt
If you are putting extra money towards paying off your house, but you’re also sitting on credit card debt, it’s time to rethink your strategy. It’s a smarter financial decision to pay off your debts with higher interest rates, such as credit cards, before turning your attention towards lower interest rate debts. Pay your bills each month in a timely manner, but focus your efforts on eliminating high interest rate debt first to avoid paying more in interest over the long run.
What’s your best advice for avoiding a financial “no-no”?