December 14, 2014

When people think about personal finance and money –many folks think things are really complicated but they really don’t have to be. Dealing with your money can be as simple or as complex as you make it. Here are three big money mistakes that many us of make—and we don’t even realize it. Not knowing where your money is going – This seems a little ridiculous, I know—until I realized I had this problem. Yes- I knew where the big chunks of money were going –to my mortgage, school loans, and cell phone bill. But what I didn’t know was that some of the tiny amounts of my hard earned money was slipping away every month in the form of automatic payments that I had set up a long time ago and forgotten about it. I’m almost embarrassed to admit it but I paid for an extra 7 months of the Zumba Teacher network resources long after I decided that becoming a Zumba teacher was NOT going to be my side hustle. At $30 a month –that was a LOT of money to give away for  services that I was no longer interested in using. It turns out I found a few other money vampires sucking the life out of my checking account.

    • How do you find the problem? Do a checking account review. Take 20 minutes to look at the checking activity on your bank card for a given month or a 30 day period. Make sure you remember and agree with all of the charges.
    • How do you fix the problem? If there are charges that are unfamiliar –you must investigate them! Most charges on a debit card come with a phone number that you can call to ask about the source of the charge. If there is no number –call your bank to ask about the charge –and if you don’t remember or know where the charge is from –investigate the charge asap. Hopefully it is just a case of a purchase that slipped your mind –but if it seems like a service that you didn’t sign up for call your back immediately –since it could be an indication of identity theft.

Using expensive small dollar credit products– I have never been a fan of what I call fake banks, primarily because they always seems to located in specific neighbourhoods and they usually prey on folks who could really use a break. According to a study by the Consumer Financial Services Innovation, an estimated 15 million people use small dollar credit each year. But if you do the math –these places are NOT doing you or I any favors. Most of payday lenders, title loan lenders, cash advance places charge interest of up to 300%. My advice is to avoid these places altogether.

    • How do you find the problem? Are you using expensive small dollar credit products now? Here is a list of these types of products below.
      • Pawn loans: Loans that are secured by personal property like jewelry or electronics
      • Direct Deposit Advances: loans that are offered as an add-on to a checking account, funds are transferred to your checking account and repaid once your next payment is in your account.
      • Car Title Loans: Loans offered by auto places and secured by the title to a used car. Borrowers keep the car during the loan term, but lenders may take possession of it you default. Loan sizes are typically near $1,000 but can range from a few hundred dollars to over $2,500, depending on the value of the borrower’s car and state regulations.
      • Installment loans: Loans ranging from several hundred to several thousand dollars offered by nonbank providers and repaid in a series of installments.
    • How do you fix the problem? There are several other alternatives that are going to be better than the products mentioned above. These products are considered predatory which is a fancy word for crappy products that rob you blind. Avoid them at all costs. But if you still need money fast try these options:
          • Consider personal lending sources –Ask your friends/family for help
          • Consider a paycheck advance from your employer
          • Consider asking your religious institution for help
          • Check out your local credit union – they will ALWAYS have better terms than a fake bank, regardless of what state you live it.
          • If you absolutely have to use a product from a fake bank –pay it off as quickly as possible –and do your best to avoid letting the situation happen again.

Want to learn more about how bad small dollar credit is? Check out this article from  bankrate.com

Committing financial infidelity – Yes, you can cheat on your spouse with your money. Committing financial infidelity means stepping outside of the financial boundaries that you and your partner have agreed to. Sneaking purchases here and there can ruin your progress toward your family’s financial goals. It is also a sure fire way to degrade the trust in your relationship. Remember many of the divorces that occur these days are the result of misunderstandings with money. Don’t let this happen to your family.

    • How do you find the problem? Are you sneaking in shopping trips or buying gifts for yourself or your children without conferring with your partner? Do you suspect that your partner might be doing this? Do you often wonder where your money goes.
    • How do you fix the problem? Confront your partner about his/her behavior and resolve to just do better. Sit down with your spouse and agree on a monthly slush fund amount. That is the amount of money that you and your spouse can spend without getting the ok from each other. For some couples its $50 for other couples its $100. Whatever your income level is, come to an agreement with your partner and stick to it.