When it comes to managing your finances and making the most of your money, what you avoid can be just as important as what you do. It’s not enough to set aside money from every paycheck and invest it wisely. It’s equally important to avoid investment fraud and other scams that could rob you of your hard-earned money.
A little common sense and a little old-fashioned skepticism can go a long way when it comes to managing your investments. Learning about the financial markets and how they work can help you spot potential scammers and keep them out of your money.
Know the current rate
One of the biggest mistakes investors make is chasing higher returns at the expense of safety. Many investors focus solely on the return on their money, without stopping to think about the return on their money.
Risk and reward are closely related, and that is something no investor can afford to lose sight of. Keeping track of current interest rates is one of the best ways investors can protect themselves.
Once you know how much Treasury bonds, certificates of deposit, and other safe investments pay, you can use that knowledge to evaluate investment offers that come your way. If Treasury bonds are paying 2 percent and offer you an investment with a 6 percent return, you can bet the investment is three times riskier than those government bonds.
make the right arrangements
One of the greatest dangers of investing occurs when one of the spouses takes the reins and handles all the financial decisions. While there’s nothing wrong with one spouse being more involved in investment decisions, it’s important for the less involved spouse to have a basic understanding of how money is handled.
Spouses should talk to each other about their finances, from where the money is invested to which brokerage firms handle the funds. It’s a good idea to make a list of all of your household’s financial assets, from workplace retirement accounts and individual stocks to mutual funds and life insurance policies. Having that information in a place both spouses can access will provide protection in the event one spouse dies or becomes incapacitated.
Neither a lender nor a borrower shall be
There is a reason the Bible includes so many warnings about borrowing and lending money. Those wise people understood the inherent danger of lending money to family and friends. They understood how those loans, made with the best of intentions, can end up destroying families and destroying the trust between great friends.
Lending money can be fraught with danger. If you want to help and have the means, consider giving the money as a gift. If you must make a loan, be sure to document everything from the interest rate to the length of the loan in writing and have the other party sign and date the document.
Cosigning a loan to a family member is another thing that may seem like a good idea at the time, but turns out to be quite the opposite. It can be difficult and heartbreaking to turn down an adult child who needs a co-signer to buy a car or rent an apartment. Still, it is important to be aware of the potential dangers of such a situation.
If you co-sign a loan for a friend or family member, you’ll be in trouble if that person doesn’t make payments or meet their financial obligations. If you and the other party agree, you should be able to come to a different solution.
If your daughter needs a car but can’t secure financing on her own, you might suggest she buy an affordable but reliable vehicle while she saves money for a better car. If her son asks her to sign a home loan, she tries to suggest that she look for a lower-priced property. Being open and honest is the best way to avoid financial problems and the misunderstandings and hard feelings they can cause.
