Some money mistakes are more stupid than others, and using credit cards for non-essential items or non-emergencies can put a person higher in debt. We’ve all made mistakes and here are 15 stupid money mistakes to avoid.
A lot of people like to head to Las Vegas or local casinos and racetracks, and as long as you look at this as an occasional form of entertainment, gambling shouldn’t be a problem. If this is the way you entertain yourself, give yourself a budget, say $20 or $50, and once it’s gone, it’s gone. Don’t be tempted by bank machines, whipping out the credit card, or filling out a marker application. It’s a stupid money mistake to gamble more money that you can afford to lose.
- Leasing a car.
This is the most expensive way to “own” a car. Depending on how many years you keep the car, times hundreds of dollars a month in lease payments, and add on any interest or penalites, you might find you’ve paid more than the car’s original value by the time you return it to the dealership. You’ll have nothing to show for this stupid money mistake.
- Clothes and shoes.
Some people are fashionistas and can’t help buying more clothes and shoes and related accessories like purses and jewellery. People need to evaluate the clothes they need for work and ensure they have one outfit to wear daily (assuming the work clothes will be washed once a week). Same with shoes or boots that are worn to work. Usually one or two pairs should suffice. Now think about your after work clothes and the activities you enjoy. What about your region’s seasonal weather? Buy only what you need, and remember you don’t need multiple outfits for similar activities.
- MLM scams.
My ex seemed to get hooked on just about every MLM pyramid scheme out there. Some more than once! You’re just throwing your money away on a slim possibility that you’ll be one in 50,000 participants who actually make money. Don’t get caught up in the rah rah hype about how everyone is going to be rich in a couple of years. Remember the old saying: if it sounds too good to be true, it probably is. You don’t need to make a stupid money mistake and get swindled by some fast talking scam artist.
- Online scammers.
Did you ever get an email with a tale of woe about a displaced member of royalty who has hidden millions of dollars that they’d like to deposit in your bank account and have you send some of them back to them? Delete that email pronto! Don’t make a stupid money mistake and have them send you a phony money order to deposit to your account. It might take the bank a couple of weeks to verify the fraud and debit your account, probably overdrawing you and putting you on the hook to repay. If you’ve signed up to an online dating site, you’ll be dealing with romantic scammers who want to steal your heart and your money. Read my article Lines Romance Scammers Use to see what opening lines they’re pitching you. Don’t continue a conversation with these jerks because that’ll end up being a stupid money mistake you’ll regret later when you’re nursing your broken heart.
- Credit cards.
Credit cards can be a sad story when people use them for true emergencies such as medical bills, car repairs, or covering their bills due to unemployment. Other people use credit cards to keep buying things they can’t afford and then they’re stuck with soaring interest rates – 20% or more! And if they’re late with a payment or go over their limit there are more penalty costs incurred plus probably higher interest rates slapped on. Save your cards for emergencies, not shopping for clothes or a weekend in New York City.
- Car loans.
Can you really afford a new car with huge monthly loan payments? That sucker is going to depreciate by 25% when you drive it off the lot. Why not save your money and buy a car for cash that you can afford? Look for cars that are 3 to 5 years old that are a good deal.
Almost the same thing as gambling. Or even those MLM scams! Chances are low you’re going to hit a good pay day. If you buy an occasional lottery ticket just for fun, and are fully aware you might not see that money again, then that’s OK. Keep those just for fun moments under $50 a year so that it doesn’t become an expensive habit and a stupid money mistake.
- Loan money to family or friends.
Loaning money to family or friends is a stupid money mistake that people never think they’ll be a victim of. They trust that person to repay the money. Before you think about lending anyone money, watch a couple of week’s of Judge Judy episodes. Just about every day someone is suing a family member or friend due to an unpaid loan. If someone you know needs to borrow money, you need to gift it to them if you’re in a position to do so, without any expectation or repayment. If the person has no other options, have them sign a loan contract that lists the repayment schedule. And then we’ll see you on Judge Judy!
- Co-sign loans.
This is very closely related to loaning money to friends or family, because that’s who you’re going to the bank to co-signing a loan for. No matter how much this person promises you they’ll religiously repay the loan on the due date, if they don’t/can’t, you’re on the hook for the money and we’ll probably see you on Judge Judy too! And this time your credit will be wrecked.
- Expensive hobbies.
I admit I have an expensive hobby: horses. My hobby is a living, breathing animal that is completely dependent on a human being for its care. Many people have much more expensive hobbies: flying lessons, seasons tickets to a sporting event, a boat, scuba diving, travel, golf, and climbing Mt. Everest. If you can’t afford it, don’t make a stupid money mistake. Find a less expensive hobby.
- Cashing out retirement savings for technology.
You don’t need to be the first kid on the block to own the latest electronic gadget. Just like you don’t need to pull out your credit card to buy a computer, an iPhone, or a sound system for your car, you don’t need to cash out your retirement savings for stuff you want. That’s a stupid money mistake that will take time to rebuild, not to mention the tax hit you took for cashing it out.
- Living somewhere you can’t afford.
It’s not easy if you live in an area where the housing prices are stupid crazy. Maybe you’re stuck there for whatever reason. Generally speaking, look for affordable housing when it comes to renting or buying. Even if that means moving to a more affordable area. You don’t want to be working two or three jobs just to pay for your housing.
- Not saving for retirement.
This is a hard one for so many people. Some people struggle their entire lives. They live paycheck to paycheck. It’s not because they’re living beyond their means. They might be living as frugally as they can, and telling these people to save for retirement is tough, because they literally have nothing leftover to put aside. To the people who are living beyond their means and running up debt and making stupid money mistakes, these are the people who are going to regret not having that money back when they retire. If you need some suggestions, check out my article on 7 Easy Ways to Save at least $2000 a Year!
- Using credit cards for the points.
Many credit cards offer points that can be exchanged for travel or merchandise, and many people use their credit cards thinking they’re going to a great deal on something down the road when they cash in their points. Some people even buy junk they don’t need just to get more points. If you can’t pay off that credit card in full when the statement comes in, and you’re taking a hit on interest making that purchase more expensive, that’s a stupid money mistake.
Don’t spend or borrow money that you can’t repay in a timely manner. Stupid money mistakes only bring more stress to your life. We’re not perfect and we all make mistakes. The important lesson is to learn from the experience and don’t keep repeating the same stupid money mistakes.
Further to expensive hobbies, click the banner to see how I can afford a horse on a budget.