Financial Decisions That Seem Smart But Might Be Really Dumb
A couple weeks ago I realized a long-time dream of mine – I was a guest on the WGN Morning News, sharing tips about money for everyday people. It was so fun! In case you missed it, here’s a recap of the money decisions people make which seem smart, but might be really dumb.
“Same as cash” means you need cash.
It’s so tempting to walk out of the furniture store with the couch of your dreams and not pay a single dime. But don’t be fooled into thinking you can worry about coming up with the money in a couple months. Chances are, if you don’t have the cash when you sign the “same as cash” agreement or don’t have a solid plan to have it in the 90 days allotted, you’ll end up paying a lot more for your purchase. If you don’t yet have the cash, plan on making monthly payments toward the purchase from day one with the total amount being paid by the deadline.
The right kind of reward.
Spending money is so much more fun when you know with every swipe of your card, you’re also earning frequent flyer miles toward your dream trip to Hawaii, right? But it’s only fun if you pay your credit card balance in full each month. Otherwise, the money you’ll spend in interest could far exceed the cost of a plane ticket to Hawaii. Plus, what fun is it to fly to Hawaii if you’re drowning in debt and can’t do anything fun? If you can’t pay your balance every month, stop using the card until it’s paid off. Then start saving your money the old-fashioned way for that vacation of a lifetime.
I’ll sign up for the 401k when I can afford it.
If your employer offers you a 401k match, you can’t afford NOT to be participating. That’s free money, Career Girls! Don’t leave it on the table just because you can’t cut back on spending a little bit. There may never come a day when you feel like you can afford to save – you just have to start doing it. The earlier you start saving, the earlier you can stop. And the earlier you can afford to stop working! Time is on your side when you start your career. Get in the habit of saving right away and find financial security that much sooner.
Rates are low, I need to buy a house!
Yes, the housing market is especially favorable for buyers right now. Just because the market says it’s time to buy does not mean it’s the right time for you. There’s so much more to consider beyond what your mortgage payment would be. You have to factor in property taxes, insurance, maintenance, and don’t tell me you won’t want to make some improvements. If you’ve been saving and it’s the right time in your life for you to settle into one home for many years, then call your Realtor. But please don’t buy a place just because you’re worried about rates and prices rising. Wait until you’re ready and the market will be ready for you then too.
Cash for a car versus 0% financing.
Conventional wisdom says that because a car loses almost half its value as you drive it off the lot, you should avoid taking on debt and pay with cash instead. This makes sense UNLESS the dealer wants to give you 0% financing. If you can pay your car off over the life of its use and it won’t cost you anything extra in interest, take the deal! Put the money you saved into a savings account to pay off the loan and earn a little bit of interest for yourself.
What other financial decisions have you made that seemed smart at the time, but ended up being kind of dumb?
Please share in the comments!