My list of financial mistakes

[sarge12]

I decided to make a list of common mistakes people make. Some of them I make.

1) Some people, even though they are struggling with debt, will say they are getting a 3000 tax refund. Why would anyone be giving the IRS an interest free loan. Many do this even while carrying a balance on credit cards, so they are essentially paying high interest on debt to loan the money to the IRS. This makes no sense at all.

2) Not using a credit card. I am a strong advocate of never using a credit card for a purchase you could not pay for with cash or check. This does not mean not to use a card, preferrably one with 2% cash back. Using a credit card instead of cash, gets rewards, increases warranties, purchase protection etc. Unless there is an added fee use the credit card for everything. Just PIF, and it costs nothing.

3) Choose card wisely! I personally never carry a balance, but many do. If you have to put a refrigerator on your credit card, and you know that you are going to have to carry a balance, choose a 0% interest or low interest card over high rewards card. High rewards cards are for PIF only. They usually have a high interest rate.

4) Plan for unknown expenses. Everyone has major expenses that are unknown, medical, AC repair, appliances, etc. At least 10% of your take home pay should be saved for these expenses. Not including them in a budget is a big mistake.

5) Upside down auto loans. Auto purchases are often long term and should have a plan B included in the decision. If you during the loan term become unemployed on a vehicle that you owe more on than it is worth..what will you do? You need to think about that at the time of purchase. It may convince you to buy a 2-3 year old car that has already depreciated, and maybe make a larger down payment. If like me, you have a massive amount of retirement savings that you have access to, being upside down might be alright. That savings is your plan B.

6) Unused assets. I look around my house and I see literally thousands of dollars worth of assets I never use. A stainless steel grill, a motorcycle, a goldwing three wheeler, and thousands of dollars worth of tools. Now, it makes no sense to have all this and never use it, but I can afford it. I have known many people though, that are drowning in debt, and as I look around they too have thousands in unused assets. I once had a friend that was telling me how far that he was behind on debts while at his house. He had a 10 gallon jar slam full of loose change.

[Anonymous]

Agree with all points especially #2. It blows my mind how many people use cash and/or a debit card for purchases. The amount of rewards, perks, benefits, assurances etc they're missing out on is incredible!

[Anonymous]

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@Anonymous wrote:
Agree with all points especially #2. It blows my mind how many people use cash and/or a debit card for purchases. The amount of rewards, perks, benefits, assurances etc they're missing out on is incredible!

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Working to get here, working to get here.  

Just came to the realization if I'm saving for a downpayment on a car I should be able to put away the amount of the monthly payment in savings toward the car.  If I can't, then I can't afford the car, end of story.  I'm learning!

[sarge12]

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@Anonymous wrote:

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@Anonymous wrote:
Agree with all points especially #2. It blows my mind how many people use cash and/or a debit card for purchases. The amount of rewards, perks, benefits, assurances etc they're missing out on is incredible!

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Working to get here, working to get here.  

Just came to the realization if I'm saving for a downpayment on a car I should be able to put away the amount of the monthly payment in savings toward the car.  If I can't, then I can't afford the car, end of story.  I'm learning!

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I agree completely...save the amount every month for 3 months prior to purchase, the added car payment amount. If that is a problem, it will be in the future. Most financial problems are caused by a failure for someone to deny themselves that which is not affordable. That is admittedly hard to do, but is a necessary part of bugeting.

[Anonymous]

I'm still more than 3 months off.  I want to save and garden, and help my score keep bumping up.  I saw this chart about average auto loan interest vs credit score.  I'd like to get it below 10%.  If not lower.  Not sure this is 100% accurate, but definitely something good to keep my goals on.  

Score Range	APR
720-850	3.336%
690-719	4.66%
660-689	6.753%
620-659	9.399%
590-619	13.719%
500-589	14.806%

[sarge12]

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@Anonymous wrote:

I'm still more than 3 months off.  I want to save and garden, and help my score keep bumping up.  I saw this chart about average auto loan interest vs credit score.  I'd like to get it below 10%.  If not lower.  Not sure this is 100% accurate, but definitely something good to keep my goals on.  

Score Range	APR
720-850	3.336%
690-719	4.66%
660-689	6.753%
620-659	9.399%
590-619	13.719%
500-589	14.806%

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My credit Union loaned me 20k on a 2015 chrysler town and country at 1.75%. This was not for me, but my Niece and they are making payments. It is on my credit and in my name until fully paid though.

[grillandwinemaster]

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@sarge12 wrote:

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@Anonymous wrote:

I'm still more than 3 months off.  I want to save and garden, and help my score keep bumping up.  I saw this chart about average auto loan interest vs credit score.  I'd like to get it below 10%.  If not lower.  Not sure this is 100% accurate, but definitely something good to keep my goals on.  

Score Range	APR
720-850	3.336%
690-719	4.66%
660-689	6.753%
620-659	9.399%
590-619	13.719%
500-589	14.806%

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My credit Union loaned me 20k on a 2015 chrysler town and country at 1.75%. This was not for me, but my Niece and they are making payments. It is on my credit and in my name until fully paid though.

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You Can add co signing to that list of financial mistakes.

Of course I can understand you doing it since you have the cash available to cover the payment in case things go South. 

[sarge12]

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@grillandwinemaster wrote:

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@sarge12 wrote:

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@Anonymous wrote:

I'm still more than 3 months off.  I want to save and garden, and help my score keep bumping up.  I saw this chart about average auto loan interest vs credit score.  I'd like to get it below 10%.  If not lower.  Not sure this is 100% accurate, but definitely something good to keep my goals on.  

Score Range	APR
720-850	3.336%
690-719	4.66%
660-689	6.753%
620-659	9.399%
590-619	13.719%
500-589	14.806%

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My credit Union loaned me 20k on a 2015 chrysler town and country at 1.75%. This was not for me, but my Niece and they are making payments. It is on my credit and in my name until fully paid though.

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You Can add co signing to that list of financial mistakes.

Of course I can understand you doing it since you have the cash available to cover the payment in case things go South. 

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I did not co-sign that loan...it is in my name only, I guess you can say I bought it, and I am renting it to her for an amount equal to payment + insurance + taxes. I did this after helping them heavily through ch.7 filing. Having no children of my own I am especially close to my Neices and Nephew. My Niece has 3 children whom I love dearly. Helping those I love in ways I can easily afford...even if they default, will never be on my list of mistakes. If she winds up not paying it, I can and will. I do agree that co-signing is a mistake even for family, if you do not have total control of the debt, and can monitor it. I also believe you should only lend to family that which you would be able to gift to them if they become unable to meet payments...and I can...without any hard feelings.

[Kidcat]

I wish I could give you 2 Kudos Sarge for starting this post. Very good list.

[Kidcat]

I will add having all credit in your name in a marriage.

If things go south, you will be the one owing the debt, not your spouse, even in a community property state like CA.