Even the smartest people tend to make extremely foolish money moves, which might cause them to suffer great financial loss. In fact, such people are often quite sure that the financial decision in question is actually quite a smart one and will offer them good returns. This belief is based on the perception that these money moves have been tried and proven true by the financial experts. Sadly, many of these seemingly smart financial decisions are just a way of throwing your hard earned money down the drain. Discussed below are 6 such money moves, which despite giving the impression of being extremely smart are nothing more than a means of wasting money.
1. Save Every Penny In A Traditional Savings Account
Most people feel that the obvious way to save money is to put it in a savings account. However, traditional saving accounts offer extremely low interest rates, which is why putting all your savings in such an account does not make much sense. A smarter move would be to keep enough funds that can cover your overall expenses for at least six months in the savings account. Any extra amount should be transferred to high yield savings account or should be placed in a low-cost target date fund offering high returns. Even though placing your funds might come with some risks, it is definitely a better option than placing the money in a plain old savings account. You might need to spend some time researching the best target date funds and other similar options you can choose from as per your needs.
2. Not Having A Credit Card For Fear Of Debt
Most people believe that owning a credit card will put them under a constant cycle of debt. However, even though not having a credit card might eliminate the risk of debt, it is still not considered to be a smart move. This is because not using a credit card also makes it difficult to for you to build a credit history. This can prove to be a major hindrance, in case you need to apply for a fast cash loans or home loans or any other regular loans. The best way to overcome this problem is by get a credit while requesting the provider banks to keep the credit limit on it extremely low. In addition, you should also schedule automatic payments for the card from your checking account to ensure timely payments and a better credit score.
3. Buying A Home Believing It To Be An Investment
Too much stress is laid on the ownership of a home, especially by people having a fairly decent income. However, buying a home is a major financial responsibility and most importantly it does not help you build your wealth. Although your home might eventually become a source of income, but before that happens you will have to invest a considerable sum of money into it. In fact, recovery of this initial investment itself might take several years and any income earned after that will be considered as a profit. Moreover, if you are buying a home for personal use, you might never be able to actually recover the money invested in it. So, unless you are financially sound enough to bear the burden of investing in your own home, making this money move is not a really smart idea.
4. Being Too Conservative As A Young Investor
If you are still in your 20’s and are following a conservative investment route, then this surely does not count as a smart money move. You might have received considerable advice about how it is good to opt for safe investment options even if you are still quite young. However, you need to understand the fact that risky investment options are in general also the ones that offer better profits. Moreover, your chances of rectifying a wrong investment decision without putting your future financial security at great risk are quite high when you are still young. So being a smart young investor, you should try to explore the various investment options available to you, even if some of them might seem to be somewhat risky.
5. Taking Loans To Cover Avoidable Expenses
The easy availability of no credit check loans has made people habitual of availing this facility for multiple reasons. While most applicants use the funds to overcome their cash crunch during a financial emergency, others might simply take these loans as a means to fulfil their desires and wishes. However, this is not something that is advisable even if you can repay the loan in full and well in time. This is because you end up paying huge interest rates on a small amount of cash borrowed for a few days to satisfy your whim. Unless you are facing a real emergency and are truly strapped for cash, availing such loans should be avoided at all costs. Then too you should make sure to repay the loan amount in time.