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We all struggle with money. About 17% of Americans report not paying all of their bills in the previous month, and about a third of us couldn’t scrape together $400 for an emergency. Inflation and stagnant wages are part of the problem, of course—but so is a lack of serious financial education. Money isn’t always just about math, because there are so many different forces—cultural, political, and macroeconomic—that affect how it behaves. That makes it challenging for many people to get a grip on their finances.
That’s why you can budget your butt off and still find yourself struggling. Sometimes a financial decision seems like a slam-dunk, can’t-lose great idea but is secretly the worst thing you could do with your money—like these seven money moves that seem like they should work to your advantage but might actually leave you much worse off financially.
Zero percent financing
Getting a 0% financing deal on a purchase or a balance transfer seems like a terrific idea: You can buy something today (or pay off a balance that’s been bleeding you for interest charges) and for a period of time (anywhere from six months to two years, depending on the specific offer) you don’t have to pay any interest on the loan.
Why it seems smart: You can get something you want or desperately need (home repairs, or a new TV) and pay it off slowly without incurring interest charges, or you can get rid of interest on an existing debt and chisel it down with some breathing room.
Why it can backfire: Aside from the fees associated with a balance transfer that can erode the benefit of 0% interest, you have to be very careful about paying these balances off before the promotional period ends—otherwise you’ll often get socked with all that deferred interest and other penalties. And 0% loans can lull you into spending more than you should, or to continue using credit cards after offloading a balance, deepening your financial hole.
Not having a credit card
Credit cards are gateways to debt and financial chaos—it’s so easy to overspend, then get caught in a doom loop of paying a steadily rising minimum payment while your balance gets bigger and bigger. The obviously smarter decision is to not have a credit card at all, or to have one that you use only in emergencies and pay off immediately.
Why it seems smart: Not having plastic temptation in your wallet means you can’t be talked into buying something you can’t afford, you never have to worry about a balance you can’t pay off.
Why it can backfire: Credit cards are one of the easiest ways to establish and enhance your credit score (payment information is 35% of your score), and not having any open credit accounts can drag your score down, making it harder to borrow money when you need to. Plus, buying things with credit cards offers a slew of protections in case you get ripped off or have a dispute with a company—and that could save your financial bacon.
Overly aggressive saving or debt reduction
You’re determined to have not just an emergency fund, but a lifestyle fund, a mound of money so big you’ll be covered for any emergency or opportunity that comes your way—or you’re pushing every spare penny into your retirement savings so you can be assured of a comfortable old age.
Why it seems smart: How can saving money or getting rid of debt be a bad thing? Having a ton of cash stashed away is like a warm security blanket, and if chipping away at debt is always a smart move, then attacking that debt with a financial sledgehammer has to be a good idea.
Why it can backfire: Being overly aggressive with savings and debt service might mean you don’t have enough money left over for other bills—if you send a big lump to your credit card but then have to charge that plus some extra to cover this month’s bills, you made your situation worse. Money in most savings accounts—even high-interest accounts—probably won’t keep up with inflation either, meaning that it’s actually worth less every year. And once you put your money into tax-privileged retirement accounts like a 401(k) plan, you can’t access it easily or without paying stiff penalties, so if you overdo it and need to claw money back to cover expenses, it’ll cost you.
Redeeming rewards for cash
You have a credit card that offers a rewards program, and you have the option to cash in your points for cash, either as a payment against your balance or as a deposit. That’s a nice little bonus, so why not put a little extra cash in your pocket?
Why it seems smart: You’ve already spent the money that generated these points, so what difference does it make? Every dollar you get back from cashing in those points reduces what you actually spent in the first place.
Why it can backfire: While getting something back for your shopping spree is great, cashing in rewards points is almost always the worst way to use them. Rewards points generally have a cash value of a penny or less—and that value goes down even more when you convert them into cash. That’s why statement credits or cash outs are almost always the worst deal. You’ll get more value using those points in just about any other way.
Traveling for deals
You’re dedicated to saving a dime wherever you can, and if that means you have to put some effort (and travel) into it, you’re okay with that. You’ll drive an hour out of your way for a great discount or cheap gas.
Why it seems smart: Well, you’re paying less for something you need to buy (like gas), so it seems like a no-brainer.
Why it can backfire: Traveling for a deal requires some math if you want to be sure it’s paying off. You have to take into account the costs of getting there—the gas you’re burning to drive there, for example. You also have to figure out how much you’re actually saving. If you drive for a half hour to save 15 cents per gallon on 10 gallons of gas, for example, you’ll save a whopping $1.50, which means you’re valuing your personal time at a princely $3 an hour. If the savings are significant it might be worth it, but just chasing after discounts is a sure way to waste time and possibly even lose money in the long run.
Buying in bulk
You need stuff to live—food, pantry items, household cleaners, etc. You know that you use a lot of this stuff throughout the year, so you decide to buy it upfront in bulk in order to save some scratch.
Why it seems smart: To be fair, sometimes bulk buying is pretty smart—buying in bulk can be a great strategy to save some money because it usually means lower per-unit prices. Most warehouse-style stores that let you buy items in bulk do offer some pretty great deals on stuff.
Why it can backfire: There are hidden costs to bulk buying, including the membership fees to warehouse stores, and if you don’t use up your haul fast enough you can lose some to spoilage and breakage, eroding the deal you got. Plus, bulk buying encourages over buying. If you buy a pallet of something just because you can and it’s ostensibly cheap but you never use it, you didn’t get a deal, you wasted money.
Buying too much house
Buying a house is generally considered a sound financial move. When you start house hunting, you’re encouraged by your mortgage broker to Go Big—you qualify for a truly astonishing mortgage amount, so why not? After all, the bank wouldn’t loan you all that cash if they didn’t think you can pay it back.
Why it seems smart: A more expensive house is usually larger, newer, and has more amenities. Plus, home values generally always go up, so you’ll be building equity in the place from day one—it’s an investment, after all. And as the nice mortgage broker explained, the difference in monthly payments isn’t huge. A $300,000 house might have a monthly payment of $1,850, while a $350,000 house comes in at $2,100—that’s just an extra $3,000 a year!
Why it can backfire: Buying the most house you can possibly borrow for puts you in a precarious position. While the mortgage payment won’t change (unless you took out a loan with a variable rate), everything else can, and probably will. Property taxes, homeowners insurance, flood insurance, and maintenance costs are all but guaranteed to rise over time. If you buy a house you can barely afford today, you may very well find yourself house poor tomorrow.
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