8 Money Mistakes That Can Really Hurt
By Barbara Pronin, RISMedia Columnist
These days, the road to financial ruin is paved with all kinds of attractive options, from payday loans to reverse mortgages to borrowing from your 401k. As you navigate through the current economy, keeping one eye firmly fixed on the future, there are some options that should be avoided if possible.
From the financial gurus at USA Today, here are eight mistakes you should avoid to keep you finances on solid footing:
Raiding your 401k It's tempting, because we think of it as a pension fund we can control. But it's a poor decision at any time, and especially bad if you are toying with bankruptcy because 401k funds are almost always protected in a bankruptcy-and if you do go bankrupt, you want to preserve your retirement.
Walking out on a mortgage If you owe more than your house is worth, you need to assess whether your money crunch is short-term or long-term. If it's short-term, talk with your lender about temporary options to keep you out of default. If it's long-term, go to makingmortgagesaffordable.gov for information on loan modification options, or work with your lender to get short sale approval.
Ignoring your card balance If you are having difficulty paying off credit card debt, work with the lender to arrange a modified payment plan.
Debt wipe-out scams Debt erasure scams are plentiful. If you need help, seek it through the National Foundation for Credit Counseling.
Co-signing a loan Whether it's for a relative, a friend, or a romantic interest, co-signing is a bad idea. If the primary payer flakes out for any reason, you are on the hook for loan repayment.
Payday loans These are marketed as short-term loans to help you through until payday. But consumers often get trapped in repeat borrowing at large and ballooning interest rates.
Reverse mortgages These may be an option for some senior homeowners, but the high fees and costs can be deadly. A home equity line might be a better option. Check with a reputable financial advisor before committing to a reverse mortgage.
Trying to stiff Uncle Sam Your signature on your tax return affirms that everything in it is accurate. A small misstep can likely be amended if questioned. A big misstep could cost you penalties-or even get you charged with fraud.
Reprinted with permission from RISMedia. ©2013. All rights reserved.