12 Money Mistakes Intelligent People Make!

Money mistakes affect us all, directly or indirectly, no one is immune. Even the smartest people can make the wrong decision about their finances from time to time.

Unfortunately, that wrong choice can have a lasting and costly impact on your finances.

Some of these mistakes are plainly obvious while others are not so obvious.

Seeing these bad choices for what they are will save you time and money.

Here are 12 money mistakes that should be avoided...

12 Money Mistakes

• Pay day loans - These short term pay advance loans are an extremely bad idea under any circumstances! With what amounts to a staggering APR rate in the neighborhood of 390% to 780% an unsuspecting one-time borrower can easily become dependent on these cash advances. Steer clear of these money traps!

• Rent to Own - Buyer beware! One of the worst money mistakes you can make is falling prey to a rent-to-own furniture deal. Unbeknownst to you are the hidden fees & interest rates above 100%. This means you will pay atleast 3-4 times the items original price!

• Overspend on credit cards - Most credit cards have an interest rate somewhere between 11% and 19%. That's not a problem if you're responsible and always pay your balance in full. Max out your card, however and you have an expensive problem especially if it takes longer than a couple months to pay it off.

TIP: If you have credit card debt this article shows you how to pay off credit cards fast.

• No Emergency fund - One of the most common money mistakes is not having an emergency fund. No one can predict if or when an emergency might happen. If it does happen the last thing you want to do is compound the problem by going into debt. Ideally you want to have 3-6 months of living expenses saved and your emergency fund should be left in something fairly liquid for easy access.

• New car lease/financing - This is one of the not so obvious money mistakes. Buying a new car is a terrible investment. It depreciates in value as soon as you drive it off the lot. Your new car will be worth 60% less after the first 2 years of ownership. On resale you take the depreciation hit and you lose thousands of dollars!

Leasing a new car is an even worse idea, you never own the car - you have the option to buy the car when the lease is up or lease a new car. Car payments for life, no thanks!

Unless you have the money to buy a new car without It makes more sense to buy used, you can invest the savings and buy a better car in a few years. For more on this topic checkout my article on buying used vs new car.

• Consolidate debt - Congratulations you just extended the life of your debt by a few years and will pay more interest in the long run. Yes, getting out of debt takes a long time but in most cases this is not a good solution. You'll save money and get out of debt faster on your own.

• Too much house - So you bought your dream home only to realize you couldn't afford it. Ideally the cost of your home should take up no more than 25% of your net income that includes your mortgage, property tax, utilities and maintenance.

• Overdraft/Bank fees - If you thought pay day loans had high interest rates try bouncing a cheque. You're in for a shock, most banks (in Canada) charge between $25-$32/transaction! Just a few transactions can cost upwards of $160 in overdraft fees. Ouch!

Speaking of banks, are you still paying bank or ATM fees? If you don't have the $2000 or so buffer in your day-to-day bank account to waive the fees try a no fee bank account instead. Bank fees, especially ATM fees can really add up - so make them stop! Look into opening a bank account with no hidden fees or charges, like this one from thinkbanking or check out ING Direct or PC Financial.

• 0$ down - Putting no money down on any transaction never ends well for the buyer. That applies to anything including getting a mortgage, buying furniture or any other large purchases you might make. The buyer is paying a hefty price for being too impatient to save money.

• Co-sign a loan - Helping a friend or family member in need seemed like the right thing to do but they stiffed you with the debt. Great way to kill a relationship!

• Mortgage consolidation - You're taking unsecured debt and working it into your mortgage. Now it will take you longer to pay it off and it will cost you a whole lot more in interest. On top of that, the debt is now secured - so if you fall on hard times and get behind on your payments you risk losing your home.

• Paying yourself last - Failing to pay yourself first is not just a money mistake - it's a crime against yourself. You are literally robbing yourself of your own financial well-being. Isn't your own financial well-being more important than any of your bills?

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