Jul 06 2012
In this economy you’d be a moron to put your money at risk.Â Â At any given moment we are susceptible to losing our jobs and not to mention our assets.Â Â Right now many investors are starting to sober up a little and hold onto their cash a bit more which I think it probably a wise decision.
However, people are still making really dumb decisions out there.Â Now, I’m not saying you should take risks in life.Â Â In fact I advocate risk more than most people.Â Â However, risking your money is a hell of a lot different than risking your time and your efforts.Â Â Many people can’t really understand the difference.
Anyway, these days it’s just not worth throwing away your money.Â Â Here are five financial risks I will try to avoid for the rest of my life…..
Investing in the Stock Market without it Being Long Term
As many people saw with the Facebook IPO, money doesn’t just come for free.Â Â The sense of entitlement out there that you should just make a 15% pop in one day is ludicrous.Â Â There’s nothing wrong with the mindset of “make more money” instead of “don’t lose money.”Â But when it comes to money you already have?Â Definitely err on the side of “protect your money.”Â Â Unless your horizon is 10 years or more you’re better off staying out of the market.Â And if you get in the market?Â Invest in an index fund (S&P 500) and let others stress about picking stocks.Â Â Put your money in a savings account.Â Yes I know, inflation might beat you out. But that’s why I said 10 years or longer.Â Â You could get waxed 20% if you pick the wrong stocks in a given year and if you need that money now, you’ll be sorry you didn’t put it somewhere safer.
Buying a Home with No Money Down
Thankfully banks are making it nearly impossible to do this anymore but come on people.Â Â Don’t be morons.Â Â Just stop it.Â Â Don’t buy a house with money you don’t nearly have.Â Â It’s one thing to put down 20% on a house and take out an affordable mortgage.Â It’s another to buy a 500K home with a mortgage of 4K a month and you haveÂ job paying you $30,000 a year.Â Believe it or not, this is what was going on back in the mid 2000s and is what led to the housing crisis.Â Â Banks were also idiots by actually signing off on these loans.Â Commissions!Â Commissions!Â It was a horrible horrible cycle.Â Bottom line, if you don’t have it within your means?Â Don’t bother.
Paying someone to manage your money
Unless you have someone you’ve known your whole life to manage your money then don’t do it.Â It’s not worth paying commissions to someone who really won’t do better than simply buying an Index Fund.Â Â Plus, wouldn’t you feel more comfortable if you were educated in financial matters?Â Open a book.Â Go on the web.Â Â These guys don’t know that much.Â You’d be surprised.Â If I lose my money, at least I know who’s responsible for losing it.
Delaying any kind of payment that involves interest or a penalty
If you can’t pay back your credit card in full every single month then don’t use a credit card.Â Â If you can’t afford your cable bill every month, then don’t get cable.Â Â If you can’t pay your car lease every single month, then take the bus.Â Do you see the pattern here?
Taking out a loan you “might” be able to pay back
Like I said, there’s nothing wrong with taking risks.Â Â Risks are part of what makes life fulfilling.Â Â But some risks aren’t worth it anymore.Â Â I know that a loan is supposed to be for money you need and don’t have.Â Â But at least have assets to pay back the loan should you insist on applying for one.
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