One of the biggest money cliches is that if a deal sounds too good to be true, it probably is. There are any number of ways you can throw your money away because you didn’t read the fine print or fell prey to a scam.
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These kinds of money traps are not unusual, and chances are just about everyone who has ever participated in the economy has fallen for one. According to a blogpost from Ramsey Solutions, here are 10 money traps Dave Ramsey recommends you avoid.
No-Money-Down Plans
It’s tempting to buy a car, piece of furniture or other high-dollar item without having to make a down payment, but you’ll usually end up with a long-term payment plan that costs more in interest than the item itself.
Car Leases
As Ramsey noted, leasing sounds good on paper, but in reality, it’s the most expensive way to drive a car. You’re better off saving up enough money to buy your own vehicle.
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Timeshares
The money trap here involves being asked to attend a meeting in exchange for a free vacation. At the meeting, though, you’ll be pressured to buy a timeshare — and if you do, you could end up being stuck with a pricey asset you will never be able to sell.
Adjustable-Rate Mortgages (ARMs)
With ARMs, you are given the option to lock in a low interest rate for a short period of time, which sounds great when you sign the contract. But after that, the rate goes up at regular intervals. In most cases, you’ll end up paying more in interest than if you had gotten a fixed rate.
Home Equity Line of Credit (HELOC)
This is a tempting option when you find yourself in need of a cash infusion by using your home equity to get a loan. But it’s almost never a good idea, because not only are you going deeper into debt, but you’re also putting your home at risk if you can’t pay the HELOC off.
Playing the Lottery
That cheap lottery ticket that could make you a millionaire overnight sounds like a great deal. The problem is the odds of winning the big prize are infinitesimal. If you make a habit of buying lottery tickets every week or so, you could end up wasting hundreds of dollars a year on them.
Subscription Scams
Ramsey has this bit of advice about subscriptions: If the company offers you a free trial but “doesn’t tell you upfront what the cost will be after the trial period,” then you should opt out immediately. Chances are you are about to get fleeced.
Surprise Contest Winnings
This is not just a money trap — it’s an outright scam that millions of people fall for. It typically involves receiving an email informing you that you won a contest before asking you to pay a fee to claim the prize. Of course, there is no contest (or prize), and the fee you pay ends up making the scammer a little richer.
Payday loans
Americans living paycheck to paycheck often seek payday loans that give them an advance on their earnings to pay unexpected bills. This can come in handy in certain circumstances, but only as a last resort. You will end up paying extremely high interest on payday loans that puts you even further behind financially. The best strategy is to create an emergency fund instead.
Investment Scams
Another common money trap is being offered unsolicited investment advice or investment opportunities from someone you don’t know representing a company you’ve never heard of. The best move is to delete the email or phone message immediately. If you want to invest your money, go to a legitimate broker and seek the advice of a professional financial advisor.
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This article originally appeared on GOBankingRates.com: Dave Ramsey’s Top 10 Money Traps To Avoid
