With troubling economic times upon us and financial analysts predicting more storms to come, now is as good a time as any to get your financial game plan in order.
Such a plan of action, however, is not merely about what financial moves you need to make; it’s just as much about those financial health-impacting moves you need to avoid.
Defender readers were asked to share financial moves/decisions they later regretted making. Their answers covered a wide range of financial pitfalls.
Loans
Houston area educators Billie Jean and Sharifa Rankins both mentioned loans, both traditional and payday, as moves that negatively impacted their finances.
“Loans seemed like a temporary fix, but ended up being more financial trouble than they were worth,” said Rankins.
“Those payday loans are such a rip-off,” said Jean. “They just put you deeper in debt.
The Center for Responsible Lending (CRL) reports that individuals are devastated daily by the debt trap of payday loans.
According to CRL, payday loan recipients have amazingly consistent stories. They go to payday lenders out of a short-term need for cash and end up caught for months, even years, paying big fees for small loans without being able to pay them off once and for all.
“As soon as you get your first loan, you are trapped unless you know you will have the 300 extra dollars in the next two weeks,” said Lisa Engelkins, a single mother making less than $8 an hour.
Engelkins paid $1,254 in fees to renew a payday loan 35 times. Lisa thought she was getting “new money” each time, when in fact she was simply borrowing back the $300 she just repaid. She paid renewal fees every two weeks for 17 months to float a $300 loan, without paying down the loan.
Suggestions for breaking out of the payday loan do-loop include requesting a no-cost extended payment plan from your lender, seeking credit counseling or looking into debt consolidation or bankruptcy.
Lack of planning
For the past 12 years, Vannessa Wade has grown the company she founded and leads as CEO, Connect the Dots Public Relations Firm.
But in the early days of her business, the journey wasn’t always smooth.
“Not planning for slow business months when I first started my business,” said Wade, was a financial move she said had negative impacts.
According to Fundbox, failing to plan for slow business months can lead to financial strain, reduced employee morale and missed opportunities. Businesses unprepared for these periods face potential cash flow issues, reduced sales and even the possibility of layoffs or furloughs.
Failure to anticipate and manage these slow times can significantly hinder a business’s ability to thrive and sustain itself.
Credit cards at young age
Wade also listed getting a credit card at age 18 as a move she wishes she could undo.
Abayomi Allen said something similar.
“Getting those ‘free’ credit cards in college was bad news,” said Allen.
Chase.com states that though most college students will have no or very limited credit history, there are a few different types of credit cards to consider. These include getting a student credit card, becoming an authorized user on an existing credit card (usually a parent) or getting someone to co-sign their credit card application.
But a teenager with a credit card comes with the temptation to spend, which can lead to a wrecked credit score.
Debit cards, pre-paid cards and secured cards are alternatives that can help young adults remain fiscally solvent.
Relocation
Jawanza Clark moved from Atlanta to Houston in the late 90s. But a job offer in the Big Apple was too appealing to pass up. So, Clark moved his family (wife and two children) to New York City.
Though Clark and his wife were satisfied with their professional lives, when asked to name a financial move he regretted, he said simply, “Moving to NYC.”
“The cost of living is absurd in New York,” he said, reflecting findings by U.S. News & World Report that listed New York as having the fifth highest cost of living in the U.S.
According to Horizon Credit Union, cost should be a primary concern when evaluating the financial impact of job relocation.
Questions that must be asked and answered before making the decision to relocate include the following:
- How much will it cost to hire movers or ship my possessions?
- Will I pay more taxes?
- Will I need to pay for a visa?
- What is the cost of living in the new area? What’s the average cost of housing? How much is gas and groceries?
- Will I have to commute to work? And will I need to buy a car or take public transport?
- Will my partner be able to get a new job in the area?
- What are the childcare implications/expenses?
Inaction
Though several actions can hurt one’s financial reality, some inactions can also do that.
“I regret not buying a house during the housing crisis, when Obama was president and the prices were dirt cheap,” said Barbara Miller. “I must have lost my mind. I looked at so many houses.”
To be fair, Miller was dealing with a lot at the time, holding down a full-time job while going to school, and dealing with the passing of her mother.
“I had to let go of something,” said Miller, who chose then to let go of the dream of purchasing a home, an inaction she still regrets.
Divorce
Divorce is usually the byproduct of multiple factors that move two people who were once joined in holy matrimony in opposite directions.
And though the financial dependence of one spouse upon another has led many to stay in relationships they’d rather end, some, like Krista Madzimoyo, joke (or state with dead seriousness) that remaining in a “broken” relationship can, for some, be a more sound financial move.
“A two-income household is better than one,” said Madzimoyo. “It’s cheaper to keep him.”
