1. Raiding your 401k!!! BAD IDEA. Your 401k was created with Tax benefits in mind and for RETIREMENT. Many people go to their 401k like a piggy bank and end up with major tax implications and not having enough money saved for retirement.
2. Running out on your mortgage!! In this day and age, especailly with the housing bubble, I have personally seen and heard some horror stories. Running out on your mortgage because your upside down is a really bad mistake. Not only does it destroy your credit, but when the bank forecloses on the home, they can come back and sue you for the difference between what you owed and what they sold it for.
3. Ignoring your credit card balance: This comes up alot in my discussions, "I want it now" attitude gets most of us in trouble. Credit cards can be a GREAT asset when they are used properly. But the major pitfall that most people fall into is trying to spend much more than they can afford. Then, what's worse, is that most people don't know how to pay the balances off correctly. Watch those balances, they will come back to bite you later!!!
4. BEWARE debt clearance companies/debt negotiation companies: most of them are scams (so if you NEED to do this, make sure you do your research), when they DO actually do their job and reduce your debt, check the mail during tax season, because your gonna get 1099'd for the amount that was forgiven on your debt!!!
5. Co-signing a loan: Ok we have all had that cousin, friend, sister or brother that just can't get that loan without someone to put their Name and CREDIT on the line for them, and some of us even went out on a limb for someone and had that limb break and your name and credit goes down with a BANG!!! Co-Signing a loan is a VERY big deal. If that person has messed up their credit or can't qualify with the income they make, then they don't deserve or can't afford the new loan they are trying to get. Keep your sanity and your CREDIT SCORE, and just don't do it!!!
6. Pay Day Loans: If you think your credit card is bad, try one of these. the interest rate can be as much as 521% on a 2 week loan. Enough Said.
7. Reverse Mortgages: Now this if for the senior crowd: be careful. The fees on these loans can be very high, and even though they market the product with the idea that you never have to make a payment on the money you recieve, it's just not true. Your children end up footing the bill because when you pass away, the bank needs to be paid back or they take the home. This option ONLY makes sense for those who have NO family to leave their property to and/or your in a such a bad financial position that all other options have been exhausted.
8. Stiffing UNCLE SAM: Uncle sam is the only entity that can garnish your wages, put a 1st position lien on your home (over and above the mortgage company) and charge you with fraud and put you in prison (remember Al Capone? he was imprisoned for Tax Evasion) Be sure that your honest about your taxes and pay the tax bill as soon as possible. This is one headache there is NO cure for!!!
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