When it comes to money, there’s a lot of misrepresentation out there. A lot of companies and organizations prey on people who want to save money and make more money.
Here are four different things to avoid as you continue your money journey:
Bad Money Idea #1: Paying for Your Credit Report
Did you know there’s a way to get your credit reports for free, without paying a cent? Visit AnnualCreditReport, and you receive one free copy of your Experian, Equifax, and Transunion credit reports once a year in the United States. Free credit reports can also be viewed through CreditKarma, and customers can obtain free credit scores from many credit card issues.
What you don’t want to do, however, is pay for a credit report that looks free. Many online sites will offer free credit reports, and then charge you for a monthly credit monitoring service that costs $10.95 a month or more. In most cases, these credit monitoring services aren’t worth the money users pay–banks and credit unions notify users if there’s weird activity happening nonetheless.
Remember–AnnualCreditReport is the way to go. And if you’re trying to figure out a bit more about credit scores, check out Almost Millions’ introduction to credit scores.
Bad Money Idea #2: Payday Loans
At first, payday loans sound like something smart for rough periods: You take out a small loan for an emergency, and pay it back once you get paid. But the reality is different.
According to the Washington Post, payday loans can have 200% or more annual interest a year–meaning you have to pay back twice the cost of a loan if you can’t afford to pay it back right away.
That’s really, really bad. It gets even worse if you default on your payday loan and take another loan to pay your payday loan.
It’s one of the many ways the poor are worse off because of exploitative financial products.
Of course, there are some situations when you need money right away and your credit isn’t good enough for a conventional loan. In those cases, reach out to your local community credit union or bank to find out about lower-interest loans… or even reach out to friends and families to borrow money.
Using a payday loan should be an absolute last option where there are no other alternatives at all.
Bad Money Idea #3: Debt Consolidation
As you improve your money habits, it’s likely that you’ll hear a lot about debt consolidation, which pays off your lenders and issues you a loan. But let’s be clear… most of the time, debt consolidation is a very bad idea.
Because debt consolidation–which is different from consolidating credit cards or consolidating student loans–consists of one very large loan, there are a lot of challenges which can arise.
Not only does debt consolidation usually mean you’ll be paying back debt longer thanks to more interest owed, but missed payments are usually accompanied by extremely costly fees and penalties.
Bad Money Idea #4: Unqualified Financial Advisors
There are lots of experts out there who can help you save money and make more money–people like financial planners, advisors, tax preparers, and accountants. But not all of these people are legitimate, and not all of them are watching out for your best interests.
For taxes, make sure your tax preparer is a Certified Public Accountant, and ideally that they are listed in the IRS Tax Preparer Directory. At the very least, anyone investing on your behalf should be a Chartered Financial Analyst or Registered Investment Advisor.
This is a good place for Almost Millions to mention that we are an information resource only, and that all financial decisions should be made with a qualified professional. Make sure to find that qualified professional, and make sure they’re looking out for your best interest!
Bad Money Ideas: Other Resources
Personal Finance For Dummies (Eric Dyson)
What’s a Credit Score, Anyway? (Almost Millions)
“Help Me, I’m Poor” – Why Everything Costs More When You’re Broke (Almost Millions)
Consolidating Credit Cards (Almost Millions)