Things You Should Never Do With Your Money

Smart ways to safeguard your hard-earned cash

We all know we shouldn’t keep our PIN with our ATM card or give our credit card number to anyone who phones out of the blue. But other financial caveats aren’t quite so obvious. Make sure you’re not breaking these rules and risking your hard-earned cash.

Never make finances a one-person show. It’s best for each spouse to play a role in managing money. Even if you divide up the chores (he balances the checkbook, you file receipts), husband and wife both should know how much comes in and goes out.

Never jump into savings schemes without investigating. Making one extra mortgage or car payment a month can add up to big interest savings—unless your lender has a penalty for early payoffs. Some life insurance policies that function as savings plans sound good—until you realize the money won’t be available in an emergency. A college tuition fund can be great—unless you’re prevented from using it in another state.

Never go more than two years without checking your credit report. “Yearly is the best bet. Checking for errors and keeping your credit report up to date will ensure that you’re able to get a mortgage or car loan when you need it,” says attorney Brette McWhorter Sember, author of Repair Your Own Credit and Deal with Debt.

Never ignore fine print. It’s not just credit card applications, but the system requirements on a computer software box or words buried in a broker’s contract. A preschool may offer reasonable weekly tuition, but if they charge a $500 registration fee and require parents to “donate” another $1,000 a year, it’s probably not such a good deal.

Never let your insurance lapse. If you end up with a medical, house or car emergency, you might have to exhaust your savings, or you might end up having to declare bankruptcy, says Tamara King, executive vice president of Women’s Financial Network at Siebert (http://www.wfn.com/).

Never pay with a check or cash unless you are certain you’ll be happy with the purchase. “If you use a credit card, you have sixty days to contest any charge. If you pay with cash or a check, the money is gone forever,” says Jim Hood, founder and CEO of ConsumerAffairs.com, an independent consumer advocacy web site.

Never cosign a loan for a friend or relative. Instead, put money into an interest-bearing account in her name and let her use it as collateral on the loan, suggests Edie Milligan, accredited financial counselor and author of The Pocket Idiot’s Guide to Repairing Your Credit. “If she defaults on the loan, you’ll lose your money, but not your credit, which is much more valuable,” she says.

Never think bankruptcy is the best way to go. Sure, it’d be nice to have all your debt erased, but not at the price of your credit rating, which stays damaged for at least seven years. Bankruptcy is a last resort.

Never trust that your income will increase to cover your borrowing. Your raise may not come through, your husband might get laid off or an illness may require ready cash. If something is not easily affordable now, skip it, says Gary Foreman of TheDollarStretcher.com.

Never hesitate to ask questions. If an extra fee on your phone bill, the wording on a service agreement or confusing language on an insurance policy throws you for a loop, speak up. Don’t stop asking questions until you completely understand.

Never buy a product or service new to you without doing your homework. Check out at least three other similar things to educate yourself about options and to be sure you’re getting the best deal, says Barbara O’Neill, Ph.D., professor of family and consumer sciences at Rutgers University. Check references or reviews from friends or in magazines like Consumer Reports or online.

Never settle for a high interest rate. Ask your credit card company for a lower rate, suggesting you may switch to a new card if they won’t deliver.

Never buy based on future good intentions. If you don’t already exercise, don’t invest in an exercise machine. If you’re hoping to get down to a size 10, wait to buy that dress until you’ve actually lost the weight. Unless you diligently keep track, don’t buy presents too far in advance, or you’ll forget you’ve stashed them away and end up buying more.

Never assume big chain stores offer the best deal. Diana Lawton and her husband of Chelmsford, Massachusetts, were planning to purchase a new lawn mower from a well-known home improvement store. Before buying, though, they checked out a small, locally owned store. “The local shop matched the price of the national home center chain and assembled it for $10 (versus the $30 the big store wanted). Plus the dealer threw in gas and oil, gave us a lesson on how to use it and even helped load it into our car,” Diana says. The small dealer also has an onsite repair shop, which the chain store doesn’t, she notes.

Never disregard the effect of “itty bitty” expenses. Cookies for a special occasion are fine; cookies every day add up. Same with that book or CD you want to buy; a shelf full can be a hefty investment.

Never rely on someone else (or Social Security) to support your retirement. You might divorce, your husband could be injured and no longer be able to contribute to the retirement plan, or the money may not end up being enough to cover two people. “Be in a position to take care of yourself at retirement,” Foreman says.

Never borrow from your retirement plan unless it’s a true emergency. Weddings, car repairs, appliances and vacations are not real emergencies, Milligan says.

Never sign a withdrawal slip before you get to the bank. “If it gets lost, anyone can make your withdrawal,” says Sember.

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