5 Common Money Traps and How to Get Out Of Them

We were all young and stupid once. Ok, some people take longer to grow out of it than others, but generally as more mature adults we can look back at things we did in earlier adulthood and wring our hands and say "why did we do that?" If we are lucky, we can just remember and move on, but often when we make mistakes with money, they continue to haunt us, because they can keep us financially trapped.

It really sucks, because we might feel disgruntled that we have to suffer for things we would never do now, but in some ways, making such mistakes helps us in the future, and teaches us important money lessons that we might not have learned otherwise. But still, once we learn our lesson, can't we move on? Why are we still trapped?

Fortunately, despite how upsetting it is to deal with money traps we got into in the past, there are ways to get out of some of them. Here are five common money traps that people fall into, and how you can get out of them.

Credit Card Traps

Credit card debt is one of those things that can haunt us for so long, and starts already at a young age. Credit card companies specifically target people that they think are vulnerable, hence all the credit card company recruiters at colleges, with young people that think they are invincible and that they will soon be rich. These people sign up for credit cards and start racking up debt, often completely irresponsible and oblivious to the problems that they will be causing to their future self when all their debt has accrued a lot of interest. I remember a newly minted adult friend who got a new expensive laptop for herself and when I asked her how she afforded it, she said "Oh, its not a big deal, I just a credit card to pay for it." She's not the only one. This is all too common. Too often people build up a lot of debt before they become fiscally responsible and begin to regret their previous money habits. 

So how do you get out of this money trap? It isn't easy, that is for sure. There are quite a few different debt payment schemes out there, each different than the other. Dave Ramsey's debt snowball method is oe of the common ways people pay off debt. Others do so differently, by working out which debt has the highest interest rate and paying that off first. Of course budgeting is very important and cutting back on your expenses so you have money to pay off your debt is the most important part. But it is doable.

Bad Loan Traps

In addition to credit card debt, there are all sorts of other loans and types of loan situations that are problematic and can really cause havoc to one's financial situation. If someone has multiple loans out from many different institutions, or if someone has a loan or multiple loans with high interest rates, these are bad money traps, because they can leave you with little money left over for living once you are paying back these loans every month.

How do you get out of these money traps? Loan consolidation is a good method if you have multiple loans that you cannot manage to pay each month. There are companies that pay off your debt to lenders and consolidate all your loans into one, so that you are only paying one loan payment each month instead of multiples. Make sure, though, that the interest rate on these aren't too high or it will just be getting yourself into another money tap.

If your loans are with really high interest rates, you can find other lenders with lower rates, or sometimes even borrow from places with no interest at all (sometimes religiously based lenders or friends and family) and use that money to pay off your debt to the higher interest rate loan in one lump sum and then start repaying with a lower interest rate.

Apartment Lease Traps

We had this issue when we needed to downsize to a smaller apartment and our lease wasn't up yet. We also had a terrible landlord that didn't fix anything, leaving us with no working hot water an entire winter and needing to bathe via sponge baths with water heated in a kettle, and then we eventually needed to pay for repairs out of pocket because the landlord wouldn't reimburse us. That was a big money trap that sucked.

The way to get out of such money traps, when your lease isn't up but you need to move, is to find someone to take over your apartment lease so that you are let off the hook. Alternatively, if your landlord sucked as much as mine did, you might try the legal route to get out of the contract for his breach of contract, but that might cost money that you don't want to spend and may take too long. But it is another option.

Sunk Cost Traps

Though I don't have personal experience with this, I have heard of people that buy cars using payments but the payments are so high and with such high interest that despite paying them off for years, they still don't end up owning much of the car, so selling it wouldn't get them the money they invested in the car, or even much at all. These people often are spending money they don't have on these car loans, but feel stuck with them, because they feel selling isn't an option because of their not making anything, so they feel they need to finish paying these loans off somehow, so that they can fully own the cars and then sell them. 

The way out? Don't. This thinking is a sunk cost fallacy. You don't pay them off. Even if it hurts to let go of something like this after you've invested so much money into it, you don't keep throwing good money after bad. We have a tendency to want to try to salvage something once we already spent a lot of money on something, but when something is a moneysuck and hurts us financially, sometimes we just have to let it go, and let the money we spent go to waste. Its better that just that money go to waste instead of even more money.

Timeshare Traps

Timeshares are another common money trap. People get lured into the idea of being able to go on "free vacations" and "invest" in timeshares. Theoretically it sounds cool- pay a little bit and be able to vacation without paying anything? Except it doesn't work nearly like that. Usually when you purchase a property and pay a mortgage, you do so with the knowledge that once you have it, you can use it when you want and get full benefit from it, but when you don't want it anymore, you can recoup that investment and buy something else that suits you better, or use that money for another purpose. However, with timeshares, no one wants to buy your timeshare, so it literally is just money that you won't ever get back, and then you need to keep on paying often large yearly expenses for this timeshare, so your vacation is far from the free you thought it would be. These can be some of the biggest money sucks, but getting out of them is hard. No one wants to buy them off of you, and people even often pay others to take their timeshares off their hands.

So how do you get out of those traps? There are timeshare exit companies, but before you use one, check on review sites to see. For example, you might want to check- Timeshare Compliance, an easy cancel? Fortunately, yes. But do your research, because you don't want a timeshare exit company to be yet another money trap that you need to get out of.

Unfortunately there are so many money traps out there that I cannot possibly go into all of them, but most traps probably are something you can get out from, just some might be more painful or difficult to leave. Don't give up hope, though. There is light at the end of the tunnel.

Have you been in bad money traps? What were they? Have you managed to get out of them? How did you manage to do that?

Penniless Parenting

Mommy, wife, writer, baker, chef, crafter, sewer, teacher, babysitter, cleaning lady, penny pincher, frugal gal

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