7 Finance Traps That No One Will Tell You
September 8, 2020 - Money Bits
“Money often costs too much.”
Ralph Waldo Emerson was better known for his essays and philosophy. This quote, however, captures the essence of human behavior around money.
In the quest to better themselves financially, people sometimes end up running on quicksand. The further they move, the more they sink into a finance trap. A situation where you are inundated with constant payments or debt financing without a clear strategy to come out of the trap.
Extricating yourself from this starts with acknowledging that you are in one, to begin with. Many people never realize that they are trapped until it is too late.
Finding yourself in such a vicious finance cycle can make for a miserable existence.
Here are some common finance traps:
- Credit Cards
Swiping a credit card is a feature of modern commerce.
Unfortunately, millions of people sink themselves deeper into financial debt every time they do this. The average American household has just over $16,000 in credit card debt.
Credit card companies hook people up by offering free stuff to mostly financially illiterate people. By the time they realize what is happening, they find themselves in a ton of debt which has absurd interest rates and they get into even more debt to meet payments.
The best way to avoid these financial traps is to study the policies of a credit card company before taking out one. Hidden fees often kick in after you miss payments and end up ballooning the debt.
If you are already deep in debt, the best way to find your way out is to create a passive stream of income. Activities like Bitcoin mining can line your pockets and help prevent calamity. Besides, you should prioritize spending to ensure you don’t dig yourself further down the hole.
- Student Loans
Student loans are perhaps the biggest financial trap out there. With the collective student debt at over $1.5 trillion, many working people in America have a tough few decades ahead of them.
The unfortunate part is that a lot of people take up student loans, with little understanding of repayment policies, and mostly spend it on unnecessary stuff. Indeed, there are some people who benefit from student loans and manage to pay it back within five years. That is impressive only that they fall in the minority.
For any young student, only take up necessary debt. Additionally, ensure that the lending company does not have predatory practices. A lot of people are in a finance trap where they have already paid well over the original principal of the loan but are still in more debt than when they started paying.
- Payday Loans
Payday loans are the worst of the worst. Indeed, some come in handy when you need emergency liquidity. However, most are just a ticking time bomb.
You get a check or cash in exchange for a promised payment on payday. The problem is that the loans come with ridiculous interest rates and you will also be signing up for a trap if your income is about as much as the loan.
Immediately you get paid, the money goes to the payday loan provider. You will have little money to meet your other needs and in a few days or weeks, you are back for another loan.
This creates a vicious cycle where you can never really plan for the money you have.
Reduce your spending to only what you need. This way, you can cut your reliance on payday loans. Find an extra stream of income to give you extra cushion. Bitcoin mining is great because it doesn’t require your constant involvement and generates reliable income. Whatever you do, steer clear of payday loans.
- Adjustable Rate Mortgages (ARMs)
The housing market crash in 2008 was a blatant reminder of the toxicity of unhealthy housing finance practices. Subprime loans and adjustable-rate mortgages were at the core of what went wrong.
Millions of people took up ARMs in the 2000s and by 2007; foreclosures were skyrocketing because people could not afford the rates they had signed up for.
Steer clear of such housing loans. Once the rates adjust, you have little control over where it goes. Touching an ARM is a risk you bring upon yourself. Play safe with affordable mortgages, even if you have to pay for longer.
- Car Leases and loans
Having a personal car is part of the American dream. You often see those commercials with a beautiful family in front of their house with a car parked in the driveway.
Then it strikes you, I could get one of those on a lease.
And while you are at it, you get an unnecessarily expensive car with payment terms you can barely meet.
Having a car on a lease or debt can be a vicious cycle for many people. Buy a car when you can afford it, and pay preferably by cash. Leasing is the most expensive way to drive a car, which you don’t even own. Avoid unnecessary car debt to prevent falling into a financial trap.
- Risk-Free Trials
The phrase risk-free is a euphemism at best.
These options are nothing more than a shady way to get you to sign up for something you don’t need. Most people forget to cancel the trial yet they added their payment information when registering for the trial. The payments end up piling up and placing a burden on your finances.
Replicate that for five or more subscriptions and you are in a mess. The monthly fee is often exponentially higher than the trial periods. Therefore, be wary of “risk-free” trials because they may be a financial trap you will live to regret.
Gambling addiction is one of the worst financial traps imaginable. Yes, you could strike the jackpot and instantly become a millionaire.
The more likely scenario, however, is that you end up like the overwhelming majority who have nothing to show for it. You will continually be in delusion about winning like the proverbial stick and carrot with low chances of getting it.
This trap also happens to be one you have within your unilateral power to leave. Like any form of addiction, you may have to seek therapy or develop strict money appropriation strategies to avoid having cash on hand to gamble.
Mine Bitcoin to Avoid Finance Traps
The common thread with these finance traps is the unquenchable thirst for more money people have. This is understandable in an economy where the majority cannot raise $400 from their savings in a sudden emergency situation.
One way of avoiding this pitfall is to broaden your financial base through diversification. It is a great way to try and even the scores. If you are in a financial trap, having multiple streams can help extricate you from the problem.
Bitcoin mining can be one of the many ways of untying yourself from financial traps.However, it is not a guarantee and many factors come into play when determining how profitable the venture is.
Mining with a professional service helps to avoid the power and cooling bills that come with solo Bitcoin mining. VBit Technologies is an equipment reseller that offers hosting services for those seeking to optimize their mining.
Our company has data centers in areas with cheap renewable power and natural cooling. These measures ensure that you can mine without the hassle.
Sign up to purchase mining equipment today on the VBit website and avoid financial traps!