Maps Ways to Avoid Worst Financial Choices

Others' missteps give clues to choosing best financial path

SAN MATEO, Calif., Sept. 3, 2008 - In this age of foreclosures, bank failures and debt-ridden consumers, Ethan Ewing, president of free online consumer portal, advises those who are concerned with their financial futures to watch the mistakes others are making -- and plot a new course to avoid following in their footsteps.

Ewing and have compiled 10 of the worst financial choices people make, along with motivation to avoid these missteps.

  1. Casually using a credit card: People who pay for their food with a credit card spend 30 percent more on average than people who pay with cash, according to a Visa study of 100,000 restaurant transactions. Those who want to avoid overspending should pay with cash when shopping or dining.
  2. Buying too much house: "The bigger the house, the bigger the headaches," Ewing said. A mini-mansion comes with mansion-sized tax payments, insurance, maintenance, upkeep, repairs and yard work, and owners of more luxurious homes are more likely to feel pressure to upgrade everything from appliances to furnishings to the cars that go in the garage. Realtors sometimes encourage buyers to purchase as much house as they can "stretch" to, but Ewing said, "Take a realistic look at your needs and your budget to choose the house that is the right size for both. Ideally, all home costs -- including insurance, taxes and maintenance - should amount to less than 35 percent of your budget."
  3. Trading in a car too early. New-car ads can be tempting, but before making the leap to a new car, evaluate the costs. If the old car is not yet paid off, odds are the dealer will just add the remaining loan payments to the cost of the new car. Repeat, and loans could piggyback until the payment is monster-truck sized. Instead, Ewing suggested, strive to keep vehicles for five to 10 years -- or at a minimum, until the previous loan is paid off.
  4. Paying too much for appliances and furnishings. Renting to own could be defined as "paying way too much for something you will wear out," Ewing noted. With interest charges that can sometimes be extremely high, what looks like a small monthly payment might actually be a very expensive way to acquire a sofa or TV. Far better is to purchase quality used goods that can last a few years while you save up for a pricier item. Along the way, smart consumers might find they would rather use that cash for retirement savings or to pay a mortgage.
  5. Borrowing from payday lenders. Payday lenders typically loan a few hundred dollars at a time, with an average interest fee of about $15 on a $100 advance. Most loans must be repaid within two weeks. In many cases, payday lenders can roll over loans again and again, resulting in effective interest rates that are exorbitant Far better: Save up an emergency fund -- even $100 to $500 can make a difference. If you must use the savings, then repay the fund as soon as possible.
  6. Not saving for retirement or raiding retirement funds. Social Security can be expected to cover only a portion of most people's retirement expenses. Therefore, saving for retirement should be thought of as a requirement, like paying taxes. Do not cash in a retirement fund except in a crisis.
  7. Not paying taxes. "There's no hiding from the IRS," Ewing said. "They will track you down eventually if you have not paid taxes, and the penalties can be harsh, from penalties and interest to garnished wages and even jail time. Seek help and immediately rectify the situation."
  8. Co-signing a loan. Loans require a co-signer when the borrower has no credit or has bad credit. Parents who have thought it through -- and laid out ground rules -- might co-sign a child's first lease. But take a big pause before co-signing on a loan for a relative and friend with shaky credit history. You might be stuck with the bill -- and a relative's trouble can turn into your own problems.
  9. Investing on a tip. Never invest life savings in a stock your neighbor, colleague or buddy recommends. "People who think these investments might be their ticket to riches need to understand that they also could be a one-way ticket to financial ruin," Ewing cautioned. Diversification is a key component of any investing strategy. Never put too much of your money in any one investment, regardless of how much hype it is generating.
  10. Do not skip the small stuff. Pay everything on time, including bills whose creditors might not start calling right away -- like child support, parking tickets and library fines. All of these bills can and do come back to haunt those who do not take them seriously.

"These 10 mistakes can cost your monetary well-being," Ewing said. "Knowing enough to avoid them can set you on the right path for financial life."


Based in San Mateo, Calif., ( is a free one-stop portal where consumers can educate themselves about complex personal finance issues and comparison shop for products and services including credit cards, debt relief assistance, insurance, mortgages and other loans. As the online portal to Freedom Financial Network, LLC, the company has served more than 40,000 customers nationwide since 2002 while managing more than $1 billion in consumer debt. Its RSS feed is available at

In 2008, Entrepreneur Magazine ranked as the No. 3 fastest-growing U.S. company on its Hot 100 list. also was named a finalist as "most innovative company" in the American Business Awards in 2008. Company co-founders and co-CEOs Andrew Housser and Brad Stroh were named to the Silicon Valley/San Jose Business Journal's "40 Under 40" list in 2008, and are recipients of the Northern California Ernst & Young 2008 Entrepreneur of the Year Award.