9 Mistakes From the Personal Finance Anarchist Cookbook

By Len Penzo

Once upon a time, no self-serving radical activist would be caught dead without The Anarchist Cookbook and its misguided recipes for making homemade bombs, tear gas, and other sinister items out of everyday household products.

In fact, Lifehacker recently put out a post “celebrating” the cookbook’s 40th anniversary with a bunch of relatively benign but dangerous do-it-yourself ideas you’d probably be better off staying away from – like making a pair of heated underwear or driving your car with an iPhone.

Of course, Lifehacker’s post got me thinking. If I were to write my own version of The Anarchist Cookbook that focused on dubious ideas that were guaranteed to – if you’ll pardon the expression – blow up your personal finances, what recipes for disaster would I include in it?

Here are a few financial Molotov cocktails for you…

1. Co-signing a loan. Talk about a bad idea. When lenders ask for a co-signer, they’re essentially saying they don’t believe the borrower will ever repay the loan. If you agree to co-sign a loan, you’ll be liable for the full amount of the loan should the borrower flake out – and the odds are, he will. Before you sign on the dotted line, ask yourself this: Is it really worth putting my financial future in the hands of someone who’s a poor credit risk?

2. Delaying retirement savings contributions. If you start saving $200 a month at age 24 – earning a modest return of only 5 percent – you’ll have more than $323,000 by the time you reach age 65. However, if you delay your contributions until you reach age 50, then you’ll have to save $1,210 every month for 15 years with the same returns to end up in the same position. Good luck with that. Unfortunately, the money you save when you’re older is much less valuable than the money you save when you are younger. That’s because compound interest is an ally of the young.