5 Financial Horror Stories You Can Avoid
Debt can be stressful, downright scary even. But it doesn't have to be. Read on, as we outline a few ways to avoid the financial nightmares debt can trigger.
October 25, 2021
Haunted houses, scary movies, and thrilling roller coasters might frighten you in a good way. But, one campfire story that’s decidedly less fun? Debt horror stories, especially when we least expect them.
Being caught off guard by money woes can create a lot of anxiety and stress. To help you avoid all kinds of financial horror stories — including debt horror stories — this season, we’re going to walk you through five scary money stories you can avoid.
Paying the interest, not the principal
When it comes to scary student loan debt stories, one mistake that can sneak up on you is putting your hard-earned extra payments towards interest instead of the principal balance. Most student loan servicers will apply any additional payments you make towards interest and any fees you incurred before they’ll apply those payments to your principal. You need to step in here and make a change.
The amount of interest you pay is based on your remaining balance, so the lower your balance, the less interest you’ll pay. Instruct your student loan servicer, either by its website, through the mail, or over the phone, to use any extra payments you make to pay off part of your balance.
It would be a shame to realize you weren’t making as much progress with your student loans as you thought, so get a plan in place with your student loan servicer and make sure they stick to it.
Getting swept up in “trendy investments”
The news is full of investment horror stories when risky investments go south, leaving investors to pick up the financial pieces. One way to ensure you don’t take too big of a risk is to stay away from trendy investments.
It’s easy to get swept up in the excitement of popular investments that everyone is buzzing about. Still, it’s important to remember that people share their investing wins a lot more than their investing losses (which can happen a lot more often than you’d think).
Do your research before you invest your money and consult a professional who can give you advice based on experience, not the latest “get rich quick” trend.
If you’re married, it also helps to have open conversations with your partner about investing to make sure you’re on the same page and are only investing your money in ways you’re both comfortable with.
Falling for predatory lending
Have you ever noticed that horror flicks aren’t all that scary the second time you watch them? Once you know what’s coming around every corner, those movies just aren’t as spooky. The same goes for predatory lending practices. You can protect yourself and avoid unnecessary scares once you know what car loan horror stories and payday loan nightmare stories to avoid.
Some of the most frightening financial situations arise in predatory lending. Car title loans require you to give your car title to the lender in exchange for borrowing money at high-interest rates for short periods.
Then, there are payday loans. Payday loans are also short-term loans with very high-interest rates that require repayment next payday. Interest rates on payday loans can be higher than 390%. Being aware of just how dangerous these loans are is the first step to avoid ever falling prey to them.
Putting off financial to-do’s
Your financial to-do list might be so long that you want to hide under the covers. However, there are certain financial to-do’s that you really shouldn’t put off. Especially if you don’t want to be starring in a retirement financial horror story of your own.
For example, there’s no better time to start saving for retirement than right now.
To help you determine your next steps when planning for retirement, it’s important to ask yourself some tough questions:
How old will you be when you want to retire?
Does your employer offer a retirement savings plan such as a 401(k) or pension plan?
Will your spouse retire at the same time as you?
Where will you live when you retire? Will you downsize your living expenses?
Do you plan to retire fully or still work part-time?
Do you want to travel or take on additional expenses such as a new hobby?
What will your medical coverage look like?
Another important step you need to take when planning for the future is determining what will happen to your assets after your death. With the proper legal guidance, having a plan in place will help ensure your loved ones aren’t living through an estate planning horror story after you’re gone.
Missing credit card payments
It’s easy to forget to make a credit card payment amongst all of the hustle and bustle of daily life. Sadly, even if you catch up on payments, the damage is already done. Late credit card payments can lead to incurring late fees, higher interest rates, and points knocked off your credit score.
To make it easier never to miss a credit card payment, one way to automate your monthly payments. Most credit card issuers will allow you to choose the payment date and how much you want to pay. You can choose to either automatically pay the entire balance or a set dollar amount.
As long as you have enough money in your bank account to pay off your bill each month without overdrafting (which can lead to a nasty bank fee), you’ll be able to avoid that sinking feeling that happens when you realize you’ve accidentally missed a payment and the penalties that follow.
If the balance of your credit card bilI scares you more than things that go bump in the night, consider Tally†. Tally can help you pay down your credit card debt faster so you can rest easier.
†To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. The APR (which is the same as your interest rate) will be between 7.90% and 29.99% per year and will be based on your credit history. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 - $300.