Money is a tool, utility and and accessory. One of the the biggest cliches about money is that if a deal sounds too good to be true, it probably is.
However, there are numerous ways you can throw your money away because you didn’t read the fine print or just fell prey to a scam.
These money traps are not weird or unusual as just everyone can/has fallen for such schemes.
Hence, the primary functions which distinguish money are: medium of exchange, a unit of account, a store of value and sometimes, a standard of deferred payment.
According to a recent report from Ramsey Solutions, there are 10 money traps to avoid;
No-Money-Down Plans
We all know how tempting it is to buy a car, piece of furniture or other high-dollar item without having to make a down payment, but you’ll usually end up with a long-term payment plan that costs more in interest than the item itself.
Car Leases
As Ramsey noted, leasing sounds good on paper, but in reality it’s the most expensive way to drive a car. You’re better off saving up enough money to buy your own vehicle.
Timeshares
The money trap here involves being asked to attend a meeting in exchange for a free vacation. At the meeting, though, you’ll be pressured to buy a timeshare and if you do, you could end up being stuck with a pricey asset you will never be able to sell back or even lease.
Adjustable-Rate Mortgages
With ARMs, you are given the option to lock in a low interest rate for a short period of time, which sounds great when you sign the contract.
Meanwhile, the rate goes up at regular intervals after that. In most cases you’ll end up paying more in interest than if you had gotten a fixed rate.
Home Equity Line of Credit (HELOC)
This is a tempting option when you find yourself in need of a cash infusion by using your home equity to get a loan. But it’s almost never a good idea, because not only are you going deeper into debt, but you’re also putting your home at risk if you can’t pay the HELOC off.
Lottery
That cheap lottery ticket that seems like it could make you a millionaire overnight sounds like a great deal. The problem is, the odds of winning the big prize are infinitesimal.
If you make a habit of buying lottery tickets every week or so, then you could end up wasting hundreds of dollars a year on them.
Subscription Scams
According to Ramsey, If the company offers you a free trial but “doesn’t tell you upfront what the cost will be after the trial period,” then you should opt out immediately. Chances are you are about to get swindled.
Surprise Contest Winnings
This is not just a money trap, it’s an outright scam that millions of people fall for. This typically involves receiving an email informing you that you won a contest and then asking you to pay a fee to claim the prize. Obviously, the contest/prize doesn’t even exist and the fee you pay ends up making the scammer a little richer.
Payday Loans
Americans living paycheck to paycheck often seek payday loans that give them an advance on their earnings to pay unexpected bills. This can only come in handy as a last resort. Because you will end up paying extremely high interest on payday loans that puts you even further behind financially. The best strategy is to create an emergency fund instead.
Investment Scams
Another common money trap is being offered unsolicited investment advice or investment opportunities from someone you don’t know representing a company you’ve never heard of. The best move is to delete the email or phone message immediately. If you want to invest your money, go to a legitimate broker and seek the advice of a professional financial advisor.
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