Few mistakes irk MainStreet more than those made with money. Good thing many messy money mistakes can be solved pretty easily and MainStreet rounded up some capital money managing minds to tell you what to do.
MISTAKE: Loaning Dough to Your Deadbeat Friends
Out of the 800 people surveyed in the new book Isn’t It Their Turn to Pick Up the Check? authors Jeanne Fleming and Leonard Schwarz discovered more than 40% of lenders never got repaid in full from friends and family. Nearly one in three got totally stiffed. “A lot of people find themselves becoming someone else’s ATM,” says Fleming.
THE FIX: Sic Your Friend on Someone Else
The internet is packed with people willing to finance your deadbeat roommate’s latest get-rich scheme - even if his credit stinks. Help your friend set up an account on social lending sites like prosper.com and lendingclub.com, which link individual microlenders with eager borrowers, at interest rates much lower than traditional banks. If you can't say 'no' put an agreement in writing, so there are no misunderstandings, says Schwarz. And for big loans, more than $500, you may want to hit up a third party intermediary like virginmoneyus.com, which helps draft a contract, set up an agreeable interest rate and facilitate the loan payments to take the pressure off your back to collect.
MISTAKE: Getting Suckered into a Store Credit Card
Sure, the 20% initial discount is tempting, but unless you can pay off your balance in full every month, don’t bother opening a store credit card. They’re notorious for their hidden late fees and higher-than-average interest rates of more than 20%. So if you don’t pay on time, “the discount can disappear,” says Carmen Wong Ulrich, author of Generation Debt. Psychologically, these cards also seem like a fake license to spend more, adds Gary Schatsky, a financial planner and co-founder of objectiveadvice.com. Just to clue you in - consumers owed more than $100 billion on these so-called limited purpose cards in 2006, according to cardtrak.com.