Life Investments that Can Cause Bad Debt
The purpose of most life investments is to gain money for short or long term financial plans. Some can be a high risk investing into. However, one should never invest at the risk of placing themselves into a deeper debt and stress unless it’s a carefully planned out strategy to gain funding fast. Here are 4 life investments that can cause bad debt.
401K Plans
401K plans generally make you money. It’s gambling with the stocks but you also have an option to participate in a stable value fund, which is like a savings plan. You can cause yourself bad debt in two specific ways. One, you could be investing too much money into your 401k plan. If you are not able to pay your bills and living paycheck to paycheck but have over 20 percent of your income going into your 401k, you need to cut back. Most employers may not even match past the first 10 percent of your investment. Only contribute the maximum of what your employer will match.
Des choking on heaviness of bad debt by codepinkhq, on Flickr. This work is licensed under a Creative Commons Attribution-ShareAlike 3.0 Unported License.
The second way you are likely causing yourself debt is ignoring your portfolio. If you try to invest into too many high yield accounts you could be throwing your money away if you do not understand the financial markets. You are able to take a loan against your 401k, so if something does happen where you need the money, you could have gambled most of your money away.
Family Insurance Policies
Your employer may offer various insurance plans such as medical, dental and life insurance. Your employer sponsored plans are more than likely cheaper than paying for personal coverage for you and your family. Your employer gets a group rate at significant savings and the coverage options may be greater. Don’t waste your money any longer. Sign up for your employer’s plan.
Automatic Investments in IRA and Mutual Funds
If you are experiencing financial issues, you should not continue to invest in an IRA or Mutual Funds. You now need expendable cash readily available in case of an emergency. If you keep investing your money instead of saving it, you could find yourself in desperate need of money and take out a high interest loan. Loans and extended credit are a prime reason people fall into debt.
Real Estate Investments
A final mention of life investments causing debt are real estate investments. Many people are able to keep their head above debt when they are investing in real estate. However, if you invest in a bad area, your tenants could stop paying rent or leave the premises all together. This leaves you with a mortgage to pay out of your pocket until you can find suitable tenants. Many people are not able to afford covering an investment property and their own living expenses.
