How did Jennifer Aniston get the honor of having an imaginary Hall of Fame named after her? Well back when she was married to Brad Pitt, she willingly agreed to let Brad do a movie with Angelina Jolie. To no one’s surprise, Brad is now with Angelina.
What I’m trying to say is, how in the world did Jennifer Aniston not see that coming? For the guys out there, that’s like letting your wife/girlfriend hang out with Charlie Sheen (aka Rick Vaughn) or Ben Roethlisberger and being surprised they made a move on her.
So in Jen’s honor, I only think it’s fair that I name the Hall of Fame of Financial Mistakes that Everyone Saw Coming after her (I’m sorry mom. I know how much you love her).
Here are the 6 Inductees:
(For those who don’t enjoy my humor, just consider this post 6 financial moves that always end up in disaster.)
# 1 – Just a Little Credit Card Debt, it’s Only One Time, and it Will Never Happen Again
Stop thinking about money for a second and think about how people gain weight.
They gain ten pounds over the holidays. Followed by loosing six in January.
Next December rolls around and they again are a little lazy in their eating habits, which causes them to gain another ten pounds. It’s just some winter weight, right? They make the same resolution as last year and again manage to loose only 6 pounds. Now they are 8 pounds over what they were two years ago.
Over one or two years, it doesn’t make much of a difference. However, ten years go by and all of a sudden this person has gained 40 pounds.
This is exactly how people get into credit card debt.
It starts out with just a small balance one month and a promise to yourself that it will be a one time thing. However, for whatever reason it’s still there the next month. A few more months go by and you’re having trouble just making the interest payments.
The easy way to avoid this is at all costs, never carry a balance on your credit card. It sounds simple but it works.
# 2 – Loaning Money to Friends and Family
I have yet to hear of a situation where loaning money to family or friends works out. Even if you get paid back, there’s alaways bad feelings towards the borrower.
You might trust and love this person but if they’re borrowing money from you, they haven’t managed their finances well in the past. Unfortunately,there is a good chance this behavior will continue in the future.
# 3 – Buying a House with Little Money Down
Say you buy a house for $250,000 with 4% down.
The first problem is that your mortgage payments are primarily going towards paying off the interest and not the principal. Therefore, you have to live in this house a long time before seeing any appreciation after paying closing costs.
The second problem occurs if the house goes down in value, which is very likely.A 10% decline over a two year period, means the house is now worth $225,000 and the amount you owe is around $239,000.
The third problem is when you have to move (job relocation, family, etc) and you owe $14,000 . Plus, you need to add in real estate commissions and closing costs. Now you’re in the hole $25,000.
# 4 – Complicated Life Insurance
If you don’t understand what you’re buying, then you shouldn’t be buying it. This is a good rule for your money in general, but especially in regards to life insurance.
Term life insurance is simple and useful. There’s a small chance your situation might call for something more, if it does, make sure you understand what you’re buying.
If you need an outside opinion, pay a fee only certified financial planner to review your life insurance. You might spend anywhere between $150-250 for an hour review. That’s money well spent.
# 5 – Buying a Nice Car Because You Can Make the Payments
I’ve seen it happen over and over again where someone who just gets their first job buys a new car. The monthly payment isn’t difficult to afford now because their expenses are low. Typically, they are living with a roommate or at home with their parents.
The problem is, they haven’t saved a penny. So they can afford the payments now, but not after maxing out their 401(k) employer match. Or, they haven’t looked at other big expenses they have coming up in the next five years, such as an engagement ring, wedding, a down payment for a house, and a Roth IRA.
So yes, they might be able to make a payment on the car. However, they do so at the expense of more important goals.
# 6 – Timing the Market, Day Trading, & Trading Foreign Currency
It doesn’t work. Around 90% of people fail miserably. A few more are lucky enough to get their money back. The ones who make the money are the ones selling the products and software on infomercials.
If you know of any other financial moves that always end in disaster, please share them in the comments.
Photo by: Hot Rod Homepage