When it comes to getting your money in order — fads, opinions, and solutions abound. However, what if these fleeting fads aren’t really in your best interest?
Though some approaches and strategies could work for some people in some situations, it’s best to personalize financial advice for your needs.
Here are some personal finance trends to watch out for along with what you can do instead of following the crowd.
1. Taking out a payday loan
Nowadays, payday loans are easier to get than ever. A simple Google search will get you to hundreds, if not thousands, of offers for payday loan products.
Either way, the payday loan can be one of the worst financial products you can get involved with. The terms tend to be extremely predatory in nature and can cause well-meaning consumers to fall into a never-ending cycle of paycheck-to-paycheck living. With an average APR of 400% or more, payday loans are pretty rough on the pocketbook.
In fact, there are a number of states that have outlawed high-cost payday loans in order to protect its residents. Other states have put caps on these type of loans in some way or another.
Alternatives to a payday loan
If you don’t want to risk your financial well-being or potential negative effects to your credit report, there are options that might work better for you.
Here are a few alternatives to payday loans you can explore:
2. Paying too much for college
The cost to attend college is so high, most students are taking out loans to finance their education. According to an annual survey conducted by the College Board, the average student loan debt balance is between $26,900 and $32,600. These are just averages, as many people can carry much more student loan debt.
While most college graduates will make an average of $50,000, the loan repayment process can be bumpy and littered with obstacles.
If you don’t want to be burdened with high amounts of student loan debt, there are reasonable alternatives to footing a high tuition bill.
Alternatives to paying high college tuition costs:
- Attend a community college, then transfer to a university
- Apply for scholarships
- Work for a university that offers tuition discounts and/or waivers
- Enroll in the armed services and take advantage of military tuition assistance
- Enroll in a tuition-free university
- Enter into an income-sharing agreement contract
- Work full-time and pay tuition outright
3. Investing apps
Investing apps can be a double-edged sword. On one hand, they actually help you start the process of investing. You can contribute money on a consistent basis with round-ups or automated deposits and watch the magic of compound interest, in an up-close and personal manner.
If you’ve ever doubted yourself as an investor, investing apps can also be a good way to gain confidence, not only in yourself but also in the savings and investment process as a whole. Plus, apps can help you put your investing on autopilot if it’s just too much for you to think about.
However, there’s a downside to investing apps that you should be aware of, too. Many of the investing apps, tend to charge higher expense for their services. In exchange for convenience and execution, you are paying a relatively high price for the management of your investments through these apps.
For example, Acorns can charge up to $3 per month to use their automated investment services. If you’re only investing, say $50 or so per month (an account balance of $600 at the end of the year) that brings your expense ratio to a whopping 6% of your portfolio. The industry average for similar investing services is around .58% of assets under management — almost a half percent.
Though investing apps can be a good introduction to investing, at some point you’ll want to explore other investment options to maximize your investing returns:
Alternatives to using investing apps:
While the cryptocurrency market has cooled down quite a bit in the past few months, there’s still a fair amount of fascination with the concept among seasoned and newbie investors alike. Depending on who you talk to, crypto-currencies could be the next big thing or the next biggest bubble to pop.
In a nutshell, cryptocurrency in is a digital monetary system designed to bring more security and less government control in banking. The idea is that this currency is not controlled by any one person or government and is, supposedly, less susceptible to fraud through counterfeiting or theft.
The only problem is that the world still has yet to find the perfect use for this technology. In fact, most of the crypto-currencies have lost a substantial amount of their value since the market peaked around 2017. The speculative trading drove prices-sky high and the currencies are still trying to recover as of this writing.
Alternatives to using investing in cryptocurrencies:
5. Travel hacking with credit cards
Travel-hacking is the strategy of using reward points, typically associated with credit spending, to make travel either extremely cheap or even free.
As people become location independent and have a continual need to “stunt for the gram” inexpensive travel tactics are among the most popular ways of sustaining these nomadic lifestyles.
Though travel hacking, in and of itself, isn’t bad, it can still be problematic for people who really can’t afford to travel or, even worse, pay tons of interest on their credit card balances in exchange for rewards points. If you are going to be a travel hacker, you should observe rule #1 which is, “Never, ever, ever pay interest.”
If you end up carrying a balance on your credit cards, you’ll pay interest on those balances (all the way up to 30% or more.) Once you pay interest on your balances, you’re no longer a travel hacker — you’re a travel sucker.
That’s because the points you’ll earn, redeemable for airline tickets, hotel stays and more, will be negated by your interested payments. In other words, you think you’ve gotten a $350 plane ticket for “free” when you really just paid $1,000 in interest for the year on your credit card balance.
While we don’t discourage travel hacking, we do suggest that you do it responsibly.
Alternatives to using travel hacking with credit cards:
There are plenty of personal finance fads that sound good on paper, but when it comes down to it, they hurt your wallet more than help.