There is a lot of misunderstanding and misinformation in the world today. This is especially true in the area of finance. While some of the poor information is obviously wrong, some of it isn’t. In fact, some of it seems so true that people take it to heart and then make big mistakes.
Below are five financial decisions that just don’t make cents. They won’t help you make or save money and could even cost you some too. There is simple just to real reason to make these. Steer clear of them when making financial decisions in the future.
1. Buying Something That Is Temporarily Interest-Free
We’ve all been wowed by commercials or advertisements that offer a product that usually has interest as interest-free. Maybe you have even been wooed into purchasing such a product. However, most the time these interest-free purchases only have a zero-interest window. Meaning that after, say, ninety days, you will have to begin paying interest again.
Many people get tricked into making these purchases when they don’t have enough money set aside. They make them because they mistakenly think it is going to help them save money. As you might suspect, this isn’t the case. They tend to get stuck with high rate plus compounding interest on the balance going forward and have to pay just as much if not more than they would in any other situation.
2. Buying Long-Term Care Insurance When You Don’t Have Money
To many people, there doesn’t seem to be any reason not to want to buy long-term care insurance. It can help pay for many basic activities that are essential on a daily basis. This is especially true about seniors.
Many people end up buying long-term care insurance when they are worried about their futures. Often this correlates to them not having a whole lot of money. But when your economic status is already low, you’d do better off saving that money since you probably already qualify for Medicaid and other care programs.
3. Buying Life Insurance for Your Child
It is all too easy to get wrapped up into thinking that you need to buy life insurance for your child. What if the worst happens? And it is common to take precautions just to be safe.
Generally, the reasoning behind buying life insurance for your child is pure and correct. It usually happens because their child needs financial support. But unless your child is a big-time star that is making money there is no real reason to have it. You would be better off on spending that same money on your child’s savings, for college or otherwise.
4. Not Owning a Credit Card
We have talked about not owning a credit card a lot in the past on Project Debt Relief. We have weighed both the pros and cons. Many people choose to not have a credit card because they want to keep themselves from ever ruining their credit or burying themselves in debt.
But not owning a credit card can actually hurt your credit score. If you can trust yourself to be responsible with one, there is no reason not to get one. It will help build your credit and put you on better terms with lenders if you ever need to take a loan.
5. No Money in Your Budget for Yourself
Saving money is tough. Budgeting is tough too. But it is also necessary. However, many people budget to the extreme, cutting out any spending money that can be spent on themselves, for fun.
It can be smart to cut out every single unnecessary item from their expenses. At the same time though this can lead to a blow up later on, where you wildly spend your money. In addition, eating out, say, once per month is definitely a nice treat and will keep you mentally healthy and happy. Save money as much as possible but allow some wiggle room so that you can do fun things.
Everyone makes a decision at some point in their life that they later regret. All too often these decisions are ones that seem to make sense upfront. However, as you can see by the five examples discussed above, these often backfire.
Your best bet, as far as finances go, is to be well versed in the pros and cons of each of your financial decisions. Research into each of them and never make a decision on the spot. This will help keep you in check and ensure that you are using your hard-earned money responsibly.