4 Risky Money Mistakes to Avoid

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Avoid these Common Money Mistakes!

Avoid these Common Money Mistakes!

Personal finance is not just about budgeting, saving money and spending more wisely. Ultimately, the way we manage our money is a reflection of our personal priorities and values in life; most financial decisions are really “lifestyle” decisions.

Some of the biggest money mistakes arise from bad habits, indecision, or lack of awareness of the possible risks and consequences of our actions. Others are the result of good intentions – wanting to help a friend get a loan, or wanting to earn some extra money on the side to help pay for a family vacation.

Although we can all make some improvements in how we spend and save, some money mistakes are too big to ignore. If you avoid these major money mistakes, you’ll have a more comfortable financial life, and hopefully have a happier, healthier life overall.

Four money mistakes to avoid:

1. Smoking.

A cigarette habit costs thousands of dollars over the course of your life, in addition to all the health care costs. That money could have bought a lot of new cars, college tuition or house payments. According to this website on the cost of smoking, a one pack per day cigarette habit costs over $15,000 in 10 years just for the price of the cigarettes – not counting all the hidden costs, such as higher health insurance premiums, lost interest earnings (that you could have earned by putting that money in the bank instead) and decreased value of your house and car (since most people don’t like to buy homes and cars that smell like smoke).

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2. Gambling.

Americans spend over $90 billion per year on gambling and while many of these gamblers are likely just enjoying a fun night out, there are problem gamblers and addicts who don’t know when to stop. American gambling losses totaled nearly $400 per person in 2010. Don’t get blinded by the dazzling casino lights; keep in mind that in gambling, the house ALWAYS wins. And if you think you might have a compulsive gambling problem, call Gamblers Anonymous at 1-888-GA-HELPS.

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3. Foreign Exchange Trading.

This is one of the riskiest, most complicated types of investing. It is possible to make money from foreign exchange trading (or “forex trading”), but it’s not for beginners or for the faint of heart – values of currencies can fluctuate rapidly for many complicated reasons that are beyond your control and you can lose money just as well as you can make money. People who succeed in forex trading tend to be sophisticated investors, full-time forex traders, or big banks who have complex financial algorithms helping them predict prices and deciding when to buy and sell.

If you do decide to try forex trading as part of your investment strategy, tread cautiously, do some extensive research before you get started, and don’t risk more money than you can comfortably afford to lose.

4. Co-signing on a loan.

Some money mistakes start with good intentions. Many people want to help their family members make a purchase, whether it’s helping a son or daughter buy a car, or get an apartment, or even buy a house. But co-signing on a loan is a risky move that can lead to trouble down the road. The trouble with co-signing is that if the person you’re signing for fails to pay their debts, you’re equally liable for the debt.

Don’t co-sign a loan unless you’re fully prepared to pay it off by yourself – otherwise you’ll be left holding the bag. Or instead of co-signing on a loan, if you want to help family or friends make a purchase, give them some cash upfront rather than risk your credit score by co-signing.

In writing this article, I’m not trying to be judgmental toward people who smoke, who occasionally play blackjack or bet on sporting events, who dabble in forex trading, or who help out a friend or relative by co-signing on a loan. But it’s important to keep in mind that all of these activities carry a certain level of financial risk that might outweigh any benefits or enjoyment that you get out of them.

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So before you place a bet, light up a smoke, or decide to co-sign on a loan for your nephew’s new business in foreign exchange trading, keep in mind that there are risks as well as rewards. And proceed with caution.

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