Getting Smart before Going Broke

If the current U.S. financial pains teach us anything it’s that debt doesn’t just show up one day. It’s almost always the result of poor, or uninformed, borrowing choices.

Understanding the ins and outs of credit will make you amongst the smartest consumers anywhere, and will save you a lot of money in interest, charges, fees, and pain later on.

By the time you say to yourself “if only I had known” it’ll be too late and all the hoping and wishing won’t turn back the clock. After all, nobody else has any interest in looking out for your financial well being. Here are the five most common pitfalls:

-Never assume, or take anyone’s word, for clauses, penalties or rights and promises on anything. Lenders, car dealers or retailers will quickly move on to the next clients while you’re the only one stuck with the contract, the payments and the debt.

-Whatever payments you’re taking on always need to fit your budget or don’t do it. Payments will never magically self-adjust to your real financial situation or money challenges down the road. When it comes to monthly payments, it’s not the time to be wildly optimistic, but rather to stop, think it through, weigh your budget, the cost of what you’re spending in interest and fees and how many years this payment will now be around.

-Remember that monthly payments are exactly the same as taking a big pay cut. It’s money that you still have to earn each month but now don’t get to keep. For years, large chunks of your income are now re-directed to a bunch of creditors who are now getting rich at your expense.

-If a credit offer sounds too good to be true – it generally is. If it seems like there’s a catch and you can’t see it – stay away.

-If you can’t understand the terms – or you’re getting promises that are not written into the contract – walk away.
You don’t speak credit – they do – so you need to get it translated into English. Oh sure, nobody wants to sound stupid or uninformed, but if you don’t do your homework, and ask the questions, paying thousands of extra dollars in interest and fees will always be a lot more painful down the road.

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