We’re getting a lot of calls on our hotline from people who are facing some tough decisions about their finances. They worry that making the wrong choice today could haunt them for years to come. That’s why we checked with the experts at Forbes magazine to find out what not to do when times are tight:
- Mistake #1: Cashing out your retirement plan. If you leave a job and take the money out of your 401(k) plan, you’ll pay at least 30% in taxes and penalties. Plus, you’ll bankrupt your future. Your best bet is to find another option like an IRA or a new 401(k) to roll the funds into. That way, you’ll avoid big losses and keep your nest egg safe.
- Mistake #2: Living off credit. When the consumer advocacy group Demos did a survey of American households, they found that one in three families uses credit cards to cover basic living expenses, but that can cost you big time. For example, if you charge $100 worth of groceries, you’ll end up paying almost $300 when you add in the interest and fees.
- Which brings us to the 3rd financial error that will haunt you: Only making minimum payments. Everyone knows that making more than the minimum payment saves money. How much? Paying off a $2,000 balance by making the minimum payment takes more than 17 years and $2,600 in interest. However, if you doubled the minimum payment, you’d be debt free in two years and pay almost seven times less in interest.
- The last bad money decision to avoid: Paying bills late. According to the National Foundation for Credit Counseling, about one in six people are late with their bills. Not only will you rack up fees, you could ruin your credit score. When you’re late, it raises the interest rate on your debt, making it harder for you to get a loan, and more difficult to find a job
