How much time is spent reading the prospectus of this investment or that? How much energy do we pour into researching our next big investment? It is not as if they all turn out as expected. But in general, we tend to perform some type of due diligence when making a big investment in a company. Why, then, do we not apply the same due diligence to the biggest investment of all: ourselves?
When it comes to investing in businesses, there are rules and BEST practices that we can apply. Buy low; sell high is one such axiom. Here are a few more that may not make great bumper stickers, but are good advice all the same:
Don’t let your life become a high-interest loan
When it comes to long-term payments on big-ticket items such as houses and automobiles, it is not the monthly payment that gets us; it’s the interest. For people with good credit, interest is not a big problem. They might pay 2% – 5%. They may even get offers that are interest free for a certain number of months.
Then, there is the other end of the spectrum where a person with pour credit making the same purchase might have to pay anywhere from 17% – 30% depending on what the law will allow in that state for that item. For the same item, the less affluent person with damaged credit will almost always pay significantly more.
When your financial life is dominated by risky paper and upside-down loans, it becomes difficult to find investors who believe in you. If you were to be perfectly honest, even you would not be a confident investor in such a life.
As long as you are in the high-interest trap, you will be a high-risk investment. There are a handful of things you can do:
- Go through your credit report with a fine-tooth comb and dispute questionable entries.
- Hire a bankruptcy attorney and see if bankruptcy relief will break the cycle.
- Get a 0% balance transfer to pay off high interest loans.
If you are not familiar with 0% balance transfer credit cards, you will want to take some time to read the information linked above. It provides a nice overview of the system, as well as an actual testimonial, and a few cards you might want to further investigate as a starting point. When it comes to people, you would insist on limiting those investments to good credit risks. Don’t make an exception for yourself. High-risk paper is still a high-risk investment, even when it is for yourself. Improve your credit worthiness before making another big bet on yourself.
Invest in quality Skimping: It is the thing we do when we do not place a high enough value on the product or service for which we are about to pay. (more…)