Post by ellise on Nov 8, 2005 23:19:03 GMT 10
Mary Hunt is the creator of Debt-Proof Living (formerly Cheapskate Monthly)
For years I've been telling you what to do with your money, and I'm not likely to stop doing that any time soon. Having a plan to manage your money is vital, but there are times when what you don't do can be equally as important.
Never co-sign a loan. There's a reason your friend or relative needs a co-signer. He presents a risk greater than an institutional lender is willing to take. You cannot afford that risk, either. You'll be putting your money at risk (you'll be on the hook for the entire balance remaining if the borrower defaults), and your credit rating, too. That's a seven-year problem you don't even want to think about. Here's a better idea if you are bent on helping:
Put money into an interest-bearing account in this person's name to be used as collateral to secure the loan. If Cousin Eddy defaults, you'll lose the collateral but your sterling credit rating will be intact. And if Ed pulls through and pays the loan as agreed, your nest egg is safe.
Never make a major purchase with cash or check. Are you shocked? Let me explain. A credit card offers a form of insurance. By law you have certain rights of recourse, especially if the item doesn't show up or comes damaged. If you pay with cash or a check, the money is gone and now you have to fight it out with the seller. Many cards insure against theft or damage to items within 90 days of purchase. And in some cases, a credit card will even extend the manufacturer's warranty. Do this: When you know the amount of the purchase, pay with a credit card and at the same time write the check to the credit-card company. Send it in. Your protection is intact, even though you have paid your bill in full.
Never borrow from a retirement account -- unless you like the sound of double taxation. Let me explain: The great thing about a retirement account is that you get to save and invest pre-tax dollars. You pay taxes on them later when you actually withdraw the money when you are of retirement age. But if you borrow from yourself, you must pay back with after-tax dollars. If your payment is $100 every paycheck, you have to earn more like $128 to net $100 for your payment. That's the first taxation. And when you withdraw that money years from now, you will pay tax on it again.
Never pay a fee you do not understand. Have you looked at your phone bill recently? Do you have a clue what that mystery fee is for, really? How about that $3 charge on your bank statement? Don't you wonder what "administrative services" covers? And why on earth are you expected to pay for that? Call. Find out. You may be surprised to discover the fee was added erroneously. When it comes to fees and extra charges, if you don't know what it is, speak up. Ask customer service. And never hesitate to ask for that ridiculous fee or charge to be reversed.
For years I've been telling you what to do with your money, and I'm not likely to stop doing that any time soon. Having a plan to manage your money is vital, but there are times when what you don't do can be equally as important.
Never co-sign a loan. There's a reason your friend or relative needs a co-signer. He presents a risk greater than an institutional lender is willing to take. You cannot afford that risk, either. You'll be putting your money at risk (you'll be on the hook for the entire balance remaining if the borrower defaults), and your credit rating, too. That's a seven-year problem you don't even want to think about. Here's a better idea if you are bent on helping:
Put money into an interest-bearing account in this person's name to be used as collateral to secure the loan. If Cousin Eddy defaults, you'll lose the collateral but your sterling credit rating will be intact. And if Ed pulls through and pays the loan as agreed, your nest egg is safe.
Never make a major purchase with cash or check. Are you shocked? Let me explain. A credit card offers a form of insurance. By law you have certain rights of recourse, especially if the item doesn't show up or comes damaged. If you pay with cash or a check, the money is gone and now you have to fight it out with the seller. Many cards insure against theft or damage to items within 90 days of purchase. And in some cases, a credit card will even extend the manufacturer's warranty. Do this: When you know the amount of the purchase, pay with a credit card and at the same time write the check to the credit-card company. Send it in. Your protection is intact, even though you have paid your bill in full.
Never borrow from a retirement account -- unless you like the sound of double taxation. Let me explain: The great thing about a retirement account is that you get to save and invest pre-tax dollars. You pay taxes on them later when you actually withdraw the money when you are of retirement age. But if you borrow from yourself, you must pay back with after-tax dollars. If your payment is $100 every paycheck, you have to earn more like $128 to net $100 for your payment. That's the first taxation. And when you withdraw that money years from now, you will pay tax on it again.
Never pay a fee you do not understand. Have you looked at your phone bill recently? Do you have a clue what that mystery fee is for, really? How about that $3 charge on your bank statement? Don't you wonder what "administrative services" covers? And why on earth are you expected to pay for that? Call. Find out. You may be surprised to discover the fee was added erroneously. When it comes to fees and extra charges, if you don't know what it is, speak up. Ask customer service. And never hesitate to ask for that ridiculous fee or charge to be reversed.
