10 major money mistakes that can easily be avoided


New York -- I'm always being asked about the most common money mistakes that people make. So here's a list of 10 that I currently see the most. Happily, they're easily fixed, by anyone who is paying the smallest amount of attention. The errors:

1. Carrying high-interest credit-card debt when you have savings in the bank. Borrowers with 18 percent debt and savings earning 4.5 percent are losing 13.5 percent a year on their money. You should use your savings to pay off your debt. With the money you save in interest payments, you can then rebuild your bank account.

2. Taking a 30-year mortgage when you can afford a 15-year loan. At 8 percent interest on an $80,000 mortgage, the shorter term will save you $73,753 in interest payments over the life of the loan.

3. Not contributing to a tax-deductible retirement plan, especially when you're young. Money saved at age 25 is worth 10 times as much as money saved at 45. Not only do these plans save you taxes. When they're sponsored by a company, your contribution may also be matched by your employer.

4. Sticking with high-rate credit cards when your credit history is good enough to earn you a card with a lower rate. For a list of low-rate cards, as well as cards with low or no annual fees, send $5 to Cardtrak, RAM Research, P.O. Box 1700, Frederick, Md. 21702.

5. Not checking up on your credit report to see if it's right. A mistake that makes your credit history look bad could cost you a mortgage or other loan that you'd counted on. TRW now offers one free credit report a year (write to TRW Consumer Assistance, P.O. Box 2350, Chatsworth, Calif. 91313). If you see a mistake there, check your file at the other leading credit bureaus -- Equifax in Atlanta, (800) 685-1111, which charges $8 for a report; or Trans Union (look in the Yellow Pages for a local office), up to $20 for a report, depending on your state.

6. Overlooking a credit union that you could join. Generally speaking, credit unions pay more interest on savings and charge less for loans. If you used to belong to a credit union, then moved away, you may still be eligible for membership. Some credit unions also accept the self-employed or small-business employees in their communities. If a close relative belongs to one, you might be eligible for it, too. If you can't easily find a credit union that will take you, write or call the Credit Union National Association, P.O. Box 431, Madison, Wis. 53701. CUNA will refer you to your state association, which can tell you what local credit unions you may be able to join.

7. Taking a five-year car loan. If you want a new car after just three or four years, you're stuck -- because your old car is probably worth less than the amount of money that's still due on the loan. If you can't afford a three- or four-year new-car loan, buy a good used car.

8. Buying credit life insurance when you take a loan. This coverage is far more expensive than it should be. If you need more life insurance, spend your money on a separate term policy.

9. Not buying enough life insurance. A family of four needs seven times earnings.

10. Not going to college, or not completing college, because you don't want to borrow the money. All the best jobs of the future will need smarts. Student loans are investments in your own future earning power.

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