Before signing your next contract, take a minute to think about the amount of money you are actually giving away. Consumers make this mistake all the time! We are blinded by such low prices when we sign up for buying a TV, gym memberships, or even warranties! People need to be much more cautious of where they are putting their money into. Here are some surprising sources of debt people often encounter.
Cell Phone Plans
A new phone comes out every year. What’s the best way to get customers to buy them? Tell them it’s free! Now you’re thinking you can go show off your new IPhone and enjoy all of its new specs. Little do you know, your phone carrier has just tricked you into signing a contract to pay off your phone and now has you as a customer for the next 3 years! Do not make this mistake! Think about what you’re actually paying for. The average smart phone usually costs about $300 – $1000. When you think about it, this is actually a lot of money to pay upfront! Hence, mobile carriers offer you a “plan” to stay with them for a certain amount of time. The higher the cost of your phone, the longer your contract will be. As a precaution, it is best to buy your own mobile device. This way you can switch from carrier to carrier over a period of time. With flexibility, you can always change to cheaper/ more completive plans that are always being released. If the cost of buying your own phone upfront is still a lot of money, trade in an old phone or obtain a used one from someone you trust!
Going to College/University
Everyone (especially from a young age) was taught that education is the key to all your success! Which in fact, is true! But it also puts the majority of students in about $50 000 of debt. The price to attend college has increased greatly over a period of time. It is very unfair, especially for families who do not have a high source of income. When a student chooses to obtain a loan, they will actually end up paying more for school than they should have due to interest rates.
Fortunately, there is a scholarship for any activity you choose to pursue. For example, universities offer athletic & creative scholarships, tuition cuts due to good grades and student competitions with opportunities to receive generous grants! Although post-secondary education can be very costly, look at it as an investment and participate in every opportunity to help reduce your tuition.
Leasing A Car
Why do people initially choose to lease a car rather than buy their own? Leasing a car can seem glamourous. For low monthly payments, you can drive a new vehicle. People usually lease a car for a maximum of 3 years, and then lease another for the next period of time. Although it is fun to always drive something different, buying your own car saves you more money in the long run. With your own car, you will eventually stop having to make monthly payments. There are also hidden fees dealers have if they feel you have given them back a car that they perceive as “damaged” or “worn out.” All in all, the best way to buy a car is to go to a dealer that offers 0% financing. That way, you end up owning your vehicle, have a reasonable amount of time to pay it off and do not pay more than the initial cost.
Buying A House
Buying a new home is very exciting. This means it is time to get new furniture, decorate the interior, and customize certain spaces. But, it is one of biggest financial decisions you will ever make. There is a lot to be done to get a new home ready, and a lot of factors to consider to maintain your home for the long run. Be mindful on how much you are spending towards the small details of your home since most likely, you do have a mortgage to pay. A mortgage seems almost impossible to avoid, but there are a lot of things you can do to reduce the amount of money you will end up paying. For example, increase the size of your down payment, make bi weekly payments rather than monthly, and if your mortgage qualifies for a renewal, obtain a lower rate.
These four supprisng sources of debt all have one thing in common, a contract with monthly payments. To reduce the amount of money you will invest into something, try your best to make the biggest initial payment possible. Although it will take a lot of sacrifice and hard work, at least it is only for a short amount of time rather than losing more in the long run. Remember, “Slow and steady wins the race.” Take your time to save up for what you want!
L. Shabudin | The Edge Blog