10 Financial Disasters to Avoid

I was talking, um more like lecturing, my son today. I may sound like a broken record but kids (he's in his 20's) these days have so many financial pitfalls just waiting to trip them up. The topic turned to finances and I laid out ten things he must absolutely avoid (many, not all, learned from experience). Here they are:

1. Payday lenders. Fortunately I have never got one of these loans but a friend did and when I saw the 345% interest rate in big bold letters on the agreement I nearly fell off my chair. I told my son I would rather have him panhandling on a corner than take out a payday loan. And I meant it. People get into a vicious cycle of payday loans--get a loan, pay it back with interest with the next paycheck, be short with that check so take out another loan, ad nauseum--pretty soon they never get out of this cycle of debt.
2. Credit cards. These start out innocuously enough. Credit cards are practically handed to each person who turns 18 in this country. They are hyped as an excellent way to build credit. Then people use them, they can't pay off the balance, they add more each month, and pretty soon they are in perma debt.
3. Rent to own places. Young people often want to move into their own home just like the one they left at mom and dads. They don't stop to think that mom and dad have built up their standard of living over thirty years, not thirty days. So they run over to the local "rent to own" place and come home with a truck load of massively over priced furniture that they will be paying off weekly for, like, ever.
4. Extended warranties. Some people swear by these, but I have found that if you buy a quality product with a good basic warranty, these over priced insurance plans are really not worth it.
5. Co-signing loans for other people. Bad idea. Bad. Bad. Bad. If your latest girlfriend has such crappy credit that she needs a co-signer, it is a good bet that she won't pay you back either when she defaults on the loan. This is especially true after y'all break up. Watch Judge Judy for further confirmation of this.
6. Loaning money to friends and relatives. Also a bad idea. If you have some money and want to help someone out, give them the money with no strings attached. Don't loan it because you probably won't get it back and you will lose a friend in the process.
7. Not saving for retirement. Yes you are young and retirement looks like it is eons away but it will be here before you know it and you don't want to end up living under a bridge. Compounding interest rocks so use it to your advantage while you are young.
8. Buying a brand new car. New cars drop 25% of their value in the half hour it takes you to sign the papers and drive it off of the lot. It's much better to buy a slightly used car and let someone else take the financial hit.
9. Paying top dollar for your purchases. You can get equally good food at the little ethnic restaurant down the street instead of paying $200 for the latest trendy restaurant. If you need a Play Station, buy it on sale or better yet, on EBay.
10. Doing stupid stuff. DUI--$4,000. Med Evac after crashing a motorcycle without a helmet on $6,500. Becoming a baby daddy with someone you never plan to have a future with--$500,000+. Ouch.

And now that you have saved so much money, you can invest in cool stuff such as emergency prep supplies, firearms (he liked that idea), a class to learn additional skills, etc.