Learning from other people’s mistakes is better than learning from your own! Here are some bad financial decisions and red flags to watch out for in your own life.

Bad financial decisions can be hard to avoid but here are a few things to be wary of:

• Cosigning on a loan: The Internet is rife with people who have broken friendships and fractured family relationships over loans gone bad. A good rule of thumb is if the bank refuses to loan money to a person, the bank has good reason to come to that decision. Ditto for being a silent partner while going into business together. Cosign only to the extent that you are able – and willing – to lose without jeopardizing your relationship with the borrower.
• Financial overreach: Just because you can afford a car payment (or mortgage payment) today, do not assume you can continue to make that payment for the next five or ten years. When you borrow, borrow less than the maximum amount you are approved for – which allows for Murphy’s Law. The day may come that you are laid off – or run out of sick time – or need to help financially in some other area of your life.
• Gambling: While gambling for entertainment, only gamble what you can afford to lose and never try to win back your losses. Know your risk tolerance for individual stock purchases or investments.
• Credit card debt: relying on credit cards for everyday purchases or ongoing needs can spell trouble. If you cannot reasonably meet your monthly expenses without the credit card, your spending needs to decrease or your earnings need to increase, often both. Supplementing via credit card is a short-term solution that will inevitably spiral to a bigger problem.
• Lack of emergency funds: failure to save for an emergency can put you into credit card debt and fast. It is a given that something will happen. Maybe your tire will go flat, your air conditioner will give out, a job will cut your hours, or a pet will need veterinary care. It is just a fact of life that things can and do happen, and preparedness is key. [Even being partially prepared is better than totally unprepared].
• Red Flags: When you see these, be skeptical, ask lots of questions, And don’t be in a hurry. Examples of red flags can be timeshares, multi-level marketing programs, work from home , offers to buy something well above market value, requests for personal information, need for secrecy, prizes for contests you do not remember entering, dating someone you can’t meet in person, payments in an unfamiliar app that doesn’t accept credit cards, overpayments where you deposit their check and refund the balance, and being offered a job you did not apply for. There are lots more. Be wary.  
• Beware of fake reviews: websites are cheap and easy to create. Take the time to look at references beyond the ones given by a person or company you are not familiar with. Stick to trusted sources.

Never apologize for not acting quickly or accepting one person’s word. Do your due diligence and give yourself permission to say no.

If it feels too good to be true, it probably is. Be wary. Be skeptical. Live below (or within) your means and tackle problems as soon as they are identified.

Additional Resources or Links

Most search engines such as Google can corroborate common scam techniques. Snopes www.snopes.com does fact-checking on published articles or common email campaigns. The Better Business Bureau still rates and publishes business entities. (www.bbb.org).

 

 

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