Yahoo Finance These 6 Money Mistakes Can Cost You Hundreds Overnight
It can often feel hard to get ahead financially, between inflation, high interest rates, and the economic pressures of everyday life. A GOBankingRates survey earlier this year revealed that nearly half of Americans have less than $500 in their savings accounts.
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One financial misstep can cause extreme distress whether you have savings or not. “Impulsive financial decisions made in the spur of the moment can have serious consequences on your finances, forcing you to start over from zero the next morning,” warned Erika Kullberg, an attorney, personal finance expert, and founder of Erika.com.
Here are six mistakes that money experts tell us could cost you hundreds, or even thousands, of dollars overnight.
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Putting Luxuries on Credit Cards
The dangers of excessive credit card use are well recognized but bear repeating. With the average credit card interest rate at 27.70% for the week of June 10, according to Forbes Advisor, a simple purchase can cost you hundreds in interest if you need more funds to pay it off immediately.
Overspending on luxuries can lead to serious credit card debt, and interest fees can add up quickly. “Charging purchases that you don’t really need is a mistake,” Kullberg said. “While it might be tempting to charge expensive devices such as gadgets or designer clothes, these extra expenses will rapidly pile up debt and interest charges on your account.”
Payday Loans
If you’re short on cash, you might consider taking out a payday loan to buy groceries or keep the lights on for another month. Kullberg called this a “financial folly,” spotlighting astronomical interest rates far exceeding credit card or personal loan rates.
“Miss a payment and you’re faced with even more charges. Now you owe several times over just for borrowing from them in the first place. This is the perfect slippery slope to start digging yourself into more debt that grows exponentially and extremely quickly,” she said.
Falling for Scams
Phishing scams that entice users to give up their bank account information, as well as the “grandparent scam,” where a con artist pretends to be a loved one and asks for a wire transfer or gift card, remain prevalent. Be cautious where and when you share your personal information.
Account transfers to Zelle, which is designed to be a payment platform for family and friends, are typically irreversible if you mistakenly send money to a cybercriminal. That’s a costly error.
Only use Zelle for transfers to family or friends. And if you’re sending payments via Paypal or Venmo, don’t check the “family and friends” box unless it’s someone you know.
If a stranger on Facebook Marketplace or an online vendor asks you to use that option so they can save on fees, it’s a huge red flag – and it’s also against PayPal’s terms of service.
Risky Investments
If you have some extra cash sitting in the bank after you’ve accrued comfortable emergency savings, you probably already know that you should put that money to work for you in the form of investments.
Dividend-earning stocks, business opportunities, and other ways to earn passive income can help you build wealth. But only if you choose wisely.
“Bad investments can wipe out your savings before you know it,” Kullberg said. “Putting your money into untested cryptocurrency schemes, get-rich-quick penny stocks, or dodgy business ideas without doing your homework can result in a catastrophic loss of funds.”
Instead, diversify your portfolio and speak to a financial advisor if you need guidance, she recommended
Not Purchasing Voluntary Ancillary Benefits like Dental and Vision Coverage through Your Job
If your take-home pay is barely enough to cover your monthly expenses, you might be hesitant to invest in voluntary insurance products your employer offers. But if you need emergency dental or vision care, it’s most likely not covered by your healthcare insurance. Not having the right insurance can cost you hundreds or thousands of medical bills overnight.
“Too many employees – and business owners, for that matter – make a huge mistake not opting into group dental or vision coverage when it’s offered,” said Michael Cohen of The DBL Center, an insurance wholesaler specializing in required and voluntary employee benefits.
If your job is one of the 86% of large businesses that offer dental coverage, according to The DBL Center, make sure to opt in. “For just a few dollars out of every paycheck, employees can get coverage that includes preventative care and emergency treatments, and even pricey oral surgery,” Cohen said.
Likewise, vision care is worthwhile whether you need corrective lenses or not; something as common as cataract surgery can cost as much as $3,000 to $6,000 per eye, according to data from UFCHealth.com.
“If you aren’t taking advantage of ancillary benefits with pre-tax dollars, especially if your employer is sharing the costs, you’re risking a tremendous financial setback if you or a family member needs care,” Cohen said.
Not Investing in Pet Insurance
Likewise, some employers today offer pet insurance as a voluntary or shared-cost employee benefit. If you have a cat or dog, your monthly pet insurance premium of less than $50 a month could add up to thousands of dollars in savings if your pet suffers a health emergency.
“Most people don’t think twice about paying for health insurance for ourselves and our family members,” Cohen said. “As a cat owner, it was a no-brainer for me to invest in pet insurance, as well. Cats and dogs get sick the same way we do. They can get into things in the home or outdoors that can lead to catastrophic injuries. Knowing our pets are covered in an emergency, for less than the price of a good steak dinner monthly, offers great peace of mind.”
Be sure to read the fine print before choosing a policy, as most reimburse vet bills and some have waiting periods before they kick in. You may still need to pay for any treatment before insurance reimburses the costs. “Talk with a licensed insurance broker if you aren’t sure about the best policy for your needs and budget,” Cohen advised.
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Using a 0% APR Credit Card Without a Plan to Pay It Off
If you have an emergency expense, whether vet bills, dental surgery, or home repairs, it might be tempting to put it on a 0% interest credit card. Likewise, if you are consolidating debt by opening a 0% balance transfer card, you might think you’re reducing your monthly expenses and giving yourself some breathing room.
But be careful. You need to calculate how much you must pay monthly to zero out the balance before you’re charged interest. And that interest will be backdated from the time you transferred the balance or made the purchase on the card.
“Credit card interest rates are quite imposing – usually above 20 percent – and failure to pay can trigger hundreds of dollars in interest that can rapidly diminish your financial well-being,” Kullberg warned.
With some foresight, careful budgeting, and expert guidance, you can avoid these six money mistakes, protect your financial well-being, and start putting your money to work for you.
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This article originally appeared on GOBankingRates.com: These 6 Money Mistakes Can Cost You Hundreds Overnight
