“Money Pit” Pitfalls – “I Pity That Fool”

Let’s relive the Eighties with Mr. T and the movie Money Pit with Tom Hanks. Ok let’s not and say we did. We can’t relive the decades past (thank goodness) and unfortunately we can’t simply erase our money mistakes of the past either. But if you are financially responsible and wary of the unethical money traps set for us by a relentless army of marketers, loan officers and the like, then you can succeed in the money game.

I have composed a list of money pitfalls that so many people fall into. Perhaps you can be unlike them and avoid them like the plague. Here they are:

Get Your First Credit Card (or your 10th) and Go on a Spending Spree

Yippee, I can buy whatever I want with a simple swipe of a piece of plastic.
Oh dear, folks, my fellow readers… don’t succumb to the stupidity!
Nothing is free, especially credit card debt! You remember that fine print on the back of that application? You probably forgot to read where it says the credit card company will determine your interest rate… perhaps a measly 25%. Oh and by making that minimum payment, you will have it finally paid off by the time you qualify for medicare. All of this for a free slice of pizza and/or a T-Shirt when you first signed up as an 18 year old in college. Oh brother.

What you should do instead:

Look into the use of credit cards as a way to build credit, and perhaps earn rewards… but only buy what you can pay for IN FULL each month and remember that if you can’t afford it yet, imagine this: DON’T BUY IT until you can. Oh and forget carrying a balance… it is a myth that it is needed to build credit folks! I have a credit score that at last check was 820… without carrying a balance! If you must carry a balance always pay above minimum and throw whatever money you can to get rid of credit card debt. The interest is just too high.

Get a Title Loan

The title loan commercials blare from our TV screens daily… need cash? Get Cash.  Lose Cash.  Boohoo.  You’ve been Punked!  No seriously, they charge processing fees and take the title of your car as well as charge triple digit interest rates.  Bad idea!  And how do you think they pay for those commercials anyway?  Seriously, I heard they even prey on our military members by placing these establishments near bases… and in generally poorer neighborhoods… The people who can’t pay end up paying up BIG TIME!  Generally speaking, I avoid any financial products advertised on TV.  They (I mean you) have to pay for those advertisements by using their products.

What you should do instead:

I repeat, if you can’t afford it, don’t buy it.  Wait until you can.  If you must get a loan, please pay it back quick in full.  Hesitation is expensive!  There are better loan products out there.  Check out for better ideas.  And be careful!  Loan sharks might smell blood in the water.

Drive that Fancy Car of Your Dreams (at least until next year)

I can’t tell you how many times have I seen the Mercedes, BMW’s, or (insert shiny new vehicle here) parked in front of a trailer.  It goes without saying, yet I’ll say it again, if you can’t afford it, don’t drive it either!  Predatory car loans can charge very high interest rates to poor credit customers.  Not to mention leasing cars.  I remember talking to a doctor one time about his amazing car (a BMW i8) seen below.

Then he admitted that he leased it!  Oh come on.  Call me an idiot but it doesn’t matter how much you make, it matters how much you keep and renting a car as a daily driver drives me insane!  Now there some exceptions when it makes sense financially to lease a vehicle.  However, if your goal is to look fancier than you are, move on and do something else.

What you should do instead:

If you can’t afford it (broken record, I know) then don’t buy it.  And if you can’t buy it, don’t lease it either just to look richer than you are.  Did you know the top ten most popular cars driven by millionaires includes Toyota Camry and Honda Accord (see here) They know the value of smart purchases and so should you!  How do you think they became millionaires in the first place?  Being smart with money!!!  Living below your means is the tried and true way to building wealth.

Buying Cars, Furniture, Clothes, etc Brand New

If you’ve got “99 problems” like Jay-Z you might need a therapist… but “retail therapy” will not fix ’em.  When you shop for brand new items, you are paying for the overhead (that is the cost to run the store, run the dealership, pay the rent, etc) that is all factored into the price you pay.  And besides that, if you had to resell those things, you lose value immediately, simply by going from “new” to “used”.  This is especially true with cars, and you can read all about the depreciation of cars here.  The decrease in value is steepest the first few years.

What you should do instead:

Obviously, buy used whenever possible.  In terms of car purchases, a used car between 3-5 years old will have the best value factoring in depreciation value and maintenance cost.  And cars these days are built to easily last 200,000 miles with proper maintenance.  Buying used goods when possible allows you to save significant amounts of money on other things like investments, tithes, or pink champagne on ice at the Hotel California.  You’d be amazed at how cheap you can find awesome items on Facebook Marketplace or Craigslist.  What I like to do is imagine exactly what I want and then go on a hunt to find it.  It often takes weeks or months before I find what I really want but I love getting them cheap!  These days, you have no excuse.  Let everyone else pay too much!  Cha-ching!

Buying Too Much Stuff

Americans have a problem.  We own too much stuff.  How did we get so much stuff?  We bought most of it.  Needlessly.  Repeatedly.  Expensively.  If you don’t believe me read here and see.  It’s appalling.  The money we spend could easily have been used to help others, invest, and save for an emergency fund.

What you should do instead:

So how do you avoid wasting all this money in our households and room in our homes.  Use the three day rule for all non-necessities over $50.  Wait three days before buying something in order to prevent buyer’s remorse. And yes, this applies to online purchases – EVEN ON AMAZON FOLKS!!!  Think about how much we really need something, and/or how much we really will want it 5 years down the road.  You’d be amazed how often after three days the excitement wears off and you realize this “cool thing” you just “had to have” really doesn’t add value to your life at all.

Ordering Food Out Too Often

It amazes me how much people spend on meals every day, whether it’s lunch at a fast food joint or a fancy dinner at Mama Mia’s.  Even a $5 hamburger and fries for lunch everyday is $25 a week which equates to $100 a month.  Don’t tell me you don’t have extra money in the budget when you spend that kind of money… and that’s the bare minimum cost of a restaurant meal.

What you should do instead:

Make meals ahead of time and put them into containers for lunch throughout the week.  Cook with family or friends at home.  Avoid prepackaged foods already prepared because their costs are higher in general.  For more food shopping tips head over to my savvy shopping blog post here.  You will save a ton of money.  And sadly I say, this includes Barstucks coffee… I say this with sniffles… Does anyone have a Kleenex?  Oh by the way, you can budget to include restaurants, coffee, and so forth but just make sure it makes financial sense.  Whew!

Other Pitfalls?  Leave Comments.





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