3 Common Money Traps People Fall For, According to George Kamel
Written by
Jennifer Taylor
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Jenna Klaverweiden
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Sometimes money mistakes aren’t inherently obvious. George Kamel, a personal finance expert and a Ramsey Solutions team personality, sees a lot of financial mishaps.
He recently shared three in an Instagram post that you may be guilty of committing. On the surface, these money traps might not seem like mistakes at all, until you hear his reasoning. Recognizing these money mishaps is the first step toward making a positive change with your finances.
Keep reading to find out whether you’ve fallen into any of these common money traps — and how to avoid doing so if you haven’t already.Â
Also see four money traps wealthy people never fall for.
Opening a Credit Card for the Perks
Many credit cards offer enticing rewards, such as the ability to earn free flights and hotel stays. Consequently, it can be tempting to open one to take advantage of these perks, telling yourself you’ll pay it off each month.
However, Kamel warned against this practice, as having a line of credit at your fingertips can be too tempting to pass up. Before you know it, the credit card you opened only for the perks may have a balance, as well as a high APR adding to your newfound debt.
Of course, it’s possible you won’t go into debt with this credit card, but it could still put a dent in your finances.
It’s not uncommon for people to open a credit card and plan to treat it like a debit card — i.e., pay it off every month — Kamel said in a Facebook post. Despite these good intentions, he said every study shows that people spend more when they use a credit card.
Taking Out a 30-Year Mortgage
Kamel doesn’t recommend taking out a traditional 30-year fixed-rate mortgage when buying a home. In a Facebook post, he advised opting for a 15-year fixed-rate conventional mortgage, with a monthly payment that’s no more than 25% of your take-home pay.
Of course, everyone doesn’t follow this advice. He said it’s not uncommon for people to take out a 30-year mortgage with the intention of paying it off in 15 years, which he cited as a common money trap.
While they might’ve had the right goal in mind, Kamel said people commonly don’t follow through with this plan, forcing them to pay significantly more in interest.
Buying a Car You Can’t AffordÂ
You might be able to make the payments on an expensive car, but that doesn’t make it a good financial decision. Kamel said investing a lot of money in a depreciating asset — like a car — is a common money mistake.
Even if you’re able to make all the payments until you officially own it, you’ll pay a significant amount in interest, he said in a Facebook post. Therefore, he advised purchasing used cars with cash and upgrading them over time.
This might not get you the flashiest ride, but it will allow you to get around town without taking on debt.
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