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More bad money moves

Among her 10 big blunders: She bought a new car and a condo for the wrong reasons.

By Karen Datko Jan 14, 2010 2:14PM

Just when you think you’ve heard it all, another blogger publishes a post about money blunders that includes some you hadn’t read about before.

 

Such was the case with Jessica Ward’s “Jessica’s top 10 money mistakes” posted at Debt Kid.

 

Jessica bought a new car because she couldn’t afford the higher interest on a used-car loan. That cracked us up. Apparently we’re not alone. “You may stop laughing now,” Jessica wrote after explaining that predicament.

 

Among her other confessions:

 

She and her husband rushed into buying a home -- with no money down -- because they needed a tax deduction. Their tax bill was $11,000, but still. Already stretching to make the mortgage payment, they found out their bathroom needed to be rebuilt, for $5,000. (The home inspector had overlooked a problem.)

She didn’t used to comparison shop. When we read things like that, we think of an old friend who once sniffed, “I don’t sale shop,” using a tone you’d normally reserve for saying something like “I don’t reuse dental floss.” (We bet she’s changed her tune.)

 

Jessica said:

Now I scrounge. I get four to five prices on items over $50 before I buy. I try thrift shops, pawn shops, online sales, Craigslist and Freecycle for things I need.

They took out a home-equity loan. It used to be common for people to tap their equity, but Jessica doesn’t excuse herself, even though they didn’t spend the money on silly stuff. “Wait! That’s not cash -- that’s equity, which can go up and down … dramatically!” she wrote. Better to save up for those extra expenditures.

They didn’t have a big enough savings cushion before starting a business. She said they “didn’t plan enough cash to last us through the startup costs plus 45 days of receivables plus payroll.” She recommends having twice the amount needed to cover that.

One takeaway from her post is that money mistakes need not ruin your life. For instance, she said, the Seattle-area condo is now worth $125,000 more than they purchased it for. “I’m attributing this to luck though, not any good planning on my part,” Jessica said.

 

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