Top 10 dumb debt decisions in 2014
Congress may be unfathomable on a good day. But, financial silliness isn't limited to them. We who elect and re-elect the best and brightest from our states are not without our own financial follies. Forget the 2013 Financial Cliff! Here is my take on the 2014 Abyss for dumb debt moves.
1. Accept admission to the most expensive college that accepts you even though you have no idea what your career will be or how much you'll earn.
You are not doing yourself any favors by attending an expensive school that may saddle you with tens of thousands of dollars in student loans until you have a clue as to what you may be doing for a career. Until you find your passion, keep expenses in mind and consider a lower-cost university or community college and limit the amount of loans you secure.
2. Get married without checking your fiance's credit report.
Show me yours and I'll show you mine. I know it's not very romantic, but neither is finding out you won't be able to buy a home when you wanted because your spouse has horrible credit and a large debt load. Knowledge is power. You owe it to yourself (and your intended) to find out what financial situation you are marrying into before you say "I do."
3. Apply for a job without first checking your credit report.
Like it or not, many employers use the information contained in applicant credit reports as part of their selection process. You don't want to be surprised by a question about your finances in an interview. Or worse, never get to be a finalist because of an inaccurate or explainable negative item from your credit report. Remember, 25 percent of all credit reports have errors!
4. Don't save for emergencies because you can't afford to.
This is an oldie but goodie. No emergency savings means you are setting yourself up for debt. You can't be the master of your finances if you don't have a savings cushion in place.
5. Take out a payday loan just until you get paid next week.
The payday loan cycle is very hard to break. If you didn't have the money for that unexpected expense this paycheck, why do you think you will have the money next paycheck? Look for alternatives to fund the expense such as selling something you don't need or borrowing from a friend or family member.
6. Purchase a car with little or no money down.
Cars immediately depreciate in value by as much as 25 percent in the first year. Without a large down payment to compensate for depreciation, you'll be upside down in your loan quicker than you can text OMG!
7. Co-sign a loan for a friend or relative to help them out.
Never, ever co-sign a loan unless you can afford to and want to make their payments for them, period! Unless, of course, you never want to speak to them again.
8. Declare Chapter 7 or 13 bankruptcy if you can't afford your student loans.
See No. 1. Student loans are next to impossible to get dismissed in a Chapter 7 bankruptcy. Taking a student loan into a Chapter 13 bankruptcy is like feeding a hungry relative for the next five years. The loans don't go away, but interest still accrues.
9. Base your retirement planning on winning the lottery, working until you die or your children taking care of you.
Odds of winning the lottery are so against you. People get ill and can't work as long as they might wish. And do you really want to burden your children? Wait a minute, do you want to burden yourself with living with your children?! Treat retirement as a debt you'll have to pay in the future.
10. Purchase a big-ticket item that you don't need because interest rates are low.
Taking advantage of low interest rates is smart. Buying something you don't need because you won't pay as much in interest is not. If you have extra money each month burning a hole in your pocket, put most of it into your retirement and/or emergency fund savings, and spend the rest on paying down those debts from 2013.
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