The Twelve Temptations

These may seem like good ideas on the surface, but they're really recipes for disaster.Most of us have been (or will be) tempted to do one or more of the following things during some point of our financial lives. These are all really common things to do with money.

Unfortunately, while they usually seem like good ideas on the surface, all too often they’re recipes for disaster. Here are twelve money temptations to avoid.

1. Using money to meet your emotional needs.

While no one wakes up one day and says, “Hey, I think I’ll go out and buy something to meet my emotional needs” it’s not uncommon to think things like “I’m bored, maybe I’ll go shopping” or “I’ve had a hard week, I deserve this new video game.”

The problem with using money to meet your emotional needs is twofold: it doesn’t work (except on a very temporary basis) and it leaves you with less money (money that you could probably better use elsewhere).

2. Getting a credit card “strictly for emergencies”.

This is the slippery slope to debt. Soon there’s emergency after emergency, and yet no one is bleeding. A credit card that starts out as “strictly for emergencies” ends up being used for “emergencies” like a late-night pizza, or a new set of blinds quicker than you’d think. We all have good intentions, and you know what they say is paved with good intentions…

3. Being too generous.

This can come from good-heartedness, a desire to please, impress, or fit in, or the inability to say no. Of course we want to make people happy. We want to see the kids’ eyes light up, feel good at work when our coworkers thank us for the treat, or sometimes just to make the little kid at the door asking us to buy a $15 ball of popcorn go away. And now and then, that’s fine. But when it cuts into the money you actually need to pay your bills, save, and be in good financial shape, it’s an issue that needs to be addressed.

4. Counting your chickens before they’re hatched.

You’ve gotten a raise that will go into effect next paycheck? Great! You’ve gone out and bought a new stereo with all the “extra money” you’ll have now? Not so great, since the money hasn’t even landed in your bank account yet. You may be wrong about the amount you’ll end up receiving. “The economy” may step in and cancel that raise last-minute. You never know for sure about things that are supposed to happen in the future. So wait until they do happen to spend the money.

5. Making “affordable monthly payments”.

“Oh sure,” you think, “I can afford $520 a month for a car payment.” Nevermind that the car is $40,000 and you’ve just committed SEVEN YEARS of your life to paying for it on a $40,000 a year salary, and that you’ve forgotten about the cost of insurance, gas, maintenance, and repairs, and that buying the car will mean you’ll be stuck in your 2bedroom apartment for the foreseeable future.

Thinking payments is short-term and can get you into hot water. Thinking “how much is reasonable to spend total for a car on my salary, with all the other things I want to do in life” is not. Paying for things with cash is even better.

6. Agreeing to cosign a loan.

Examples of situations where you might be tempted to cosign a loan include helping out a loved one who really needs a car/to go back to school/to get into a house, etc. But there’s a reason they need a cosigner. That reason might just be that they’re young and inexperienced, but how do most of us get experience? By making mistakes and doing things the hard way.

Don’t let their potential mistakes become yours. You could end up paying for a car you don’t own, being sued, watching as they spend they money they should be spending on your joint debt traveling the country, etc. Plus, who wants to take on debt, or to encourage others to do so?

7. Borrowing money from relatives.

I once borrowed money from relatives, and let me tell you that although they never made me feel badly about it — in fact they were happy to help out — I hated owing that money. It just made me uncomfortable all the time. Borrowing money changes how you feel about each other. All that was while I made payments back faster than I’d promised. What if something had happened and I couldn’t pay on time or as promised? I’d have felt even worse.

8. Believing the hype.

That school looks so great! So what if the tuition is $40,000 a year? They have a 90% placement rate. You’re sure to get a job right after graduation, make the big bucks, and whip through those student loans like butter! Right? Well, not really.

Maybe the “placements” are unpaid internships that last 6 months. Maybe it’s a new branch of the school, and the high placement rates were back when they only had 5 students and were located in a city heavily in need of exactly what their students trained for. Maybe the placement rate was completely true, but the year you graduate, the bottom falls out of the industry.

The point is, don’t believe the hype. Schools make money by recruiting students. How do you recruit well? You sell well. And past performance is not a guarantee of future performance.

9. Trying to get rich quickly.

It seems like such a sure thing. Maybe your friend or relative is doing it, and is really enthusiastic about it and wants you to get in on this great opportunity too. And it’s only a $295 investment, so what do you have to lose? Well, $295, for one. Your time and energy, for another. Make an “investment” like that every year, and you’ll have spent a whole lot of money that you could have put to better use instead.

Of course, we want to believe, but the surest way to get rich is to spend less than you earn over time, and to consistently invest that money in a highly diversified mix of regular investments instead.

10. Making excuses for yourself or a loved one.

Oh, of course your spouse didn’t mean to get that overdraft. We’ve probably all had an overdraft or two. They’ve just been so busy lately that they forgot to deposit their check. Yes, we do all make mistakes. But if it’s the third time this month that the account’s been overdrawn, it’s time to quit making excuses. Face reality and get the problem taken care of.

11. Trying to borrow your way out of debt.

This is another one that makes sense on the surface. Why not take out a home equity loan to pay off your credit cards? It’s lower interest rate, you’ll only have one payment, you’ll get it paid off so much more quickly, etc. Except chances are, you won’t.

We all have great intentions, but what usually happens is that we keep right on doing the things we’ve been doing. When the thing we’re used to doing is borrowing money, we keep right on borrowing money. Before you know it, you’ve got even MORE debt — that home equity loan and new credit card debt. Your behavior is the real problem, and changing that is the real solution. (Interested in getting out of debt? Check out this page.)

12. Being optimistic without considering possible roadblocks.

When planning for the future, we usually think about the best case scenario. We’ll continue to keep working, we’ll get raises, we won’t incur any unplanned expenses, there will be no emergencies, the bottom won’t fall out of the stock market just as we’re about to retire, we’ll always be in perfect health, etc. Under those circumstances, our personal financial plan makes sense.

But in life, nothing goes 100% perfectly. It’s great to be optimistic, but it’s even better to hope for the best and plan out a few alternatives. Don’t count on everything going as planned. Give yourself some wiggle room and you’ll be in a lot better shape.

How many of these have you been tempted by? The number hit 8 for me…


One comment

  • What a great article Jackie! Very sage advice. If everyone stuck to these 12 rules I think we would all be so much more financially secure.