Skip building a savings "ark"
When it comes to rainy days, Noah found out the hard way. Likewise, without a savings cushion to fall back on, unexpected expenses invariably end up on a credit card
. Better to save six to 12 months' of living expenses in an emergency savings account. Then, when the car's air conditioner breaks down, you have a major medical expense or some other event clouds your skies, you have rescue funds available to float you through.
Lie to your significant other about your spending
Not only is lying about your spending a bad idea for your relationship, it can wreak havoc on your finances
. For example, your significant other may hope to buy a home or take a trip soon. Those plans could be canceled because of your secret debt. Minimize the damage. Fess up before you get exposed.
Deliver yourself into indentured student-hood
It's not smart to take out huge student loans
without knowing what career field you are going into or how much you'll earn. Defaulting can end up costing thousands and thousands of dollars. Before you borrow, know how you're going to pay it back. Also, be a sport and don't ask your parents to co-sign. See Sin No. 1.
Drive upside down
Texting and driving is bad. Driving a car that's worth less than the amount you owe is a close second. Your car depreciates immediately after you drive it off the lot. Without a big down payment, you will quickly become upside down on the car loan
(owe more than the car is worth). So, if you buy a car and can't afford an adequate down payment, or if the monthly payment is a stretch, any change in your financial situation could put you immediately upside down and in default.
Pray for better terms
Using credit wisely allows us to buy items that we would have trouble paying for with cash, such as our homes and cars. However, if you can't qualify for a reasonable interest rate for a large item, don't just pray for help. Fix whatever credit problems
you have yourself. Then you won't have to put your firstborn up for collateral.
Risk your home and retirement
The two most popular assets that people use for collateral to borrow against are their homes and their retirement accounts. Borrowing against these assets can put you in jeopardy. Do so only when necessary, and with a firm plan in place to pay the loan. Try to keep your mortgage loan to 80 percent or less of the home's value. Don't risk your retirement, because it will come whether you are ready for it or not.
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