Building wealth is a challenge. Just when you think you’re on the right track, you fall into “money traps” that can put you right back where you started… or worse. In many cases, these money traps seem like good ideas at the time but they can create real obstacles to your financial security.

We did a little research, and without further ado, here are the top 17 money traps to avoid at all costs:

Leasing a Car Instead of Buying

It can be really tempting to lease a car, especially if it allows you to get a better one than you could afford to buy. Oh, and hey, you can upgrade it every few years like your cellphone.

Leasing can work well if you really do plan on keeping the car for three years or less, but it’s not all it’s cracked up to be. First of all, your leased car has a mileage limit, with some pretty significant penalties if you go over the lease. You might also be charged for “damage” when you turn the car in.

You also can’t put extra money towards paying off a lease; you’re going to be paying that amount no matter what. Also, if the car is totaled in an accident, guess what? You’ll still be paying those lease payments. With no car.

Instead of leasing, look into financing for a car. Better yet, buy a preowned car with cash if you can.

Those Tempting Zero Down Loans

Just don’t do it. Zero-down mortgages were a huge part of the housing collapse, with people taking out loans they couldn’t afford. Zero-down loans for a car are always more expensive than loans with a down payment. Save until you can afford a healthy down payment instead, or look for a cheaper purchase.

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Look at That Discount! I’ll Get Another Credit Card

Credit card providers woo us with cash back. Retail and other “tied” credit cards woo us with something even more tempting – discounts. People then keep getting cards until they have a wallet full.

This is bad for your financial discipline and for your credit score. Retail cards, in particular, have even higher interest rates than regular credit cards — and more fees. Oh, and those 0% interest offers are deferred interest, meaning if you have a balance when the promotional period ends you’re paying interest anyway.

Stick to one or two credit cards, through your bank or somebody reputable, and ignore those discount offers.


Timeshares are as bad as they say. It’s almost always cheaper just to get a hotel room, they’re a big financial commitment, and you’re stuck with the week in your contract. Oh, and timeshares lose value over time, pretty much universally. Just don’t do it. You’ll have a better vacation budget. And you’ll get to go more than one place.


They can be hard to avoid, but don’t buy a house in a development with a homeowners’ association if you can possibly avoid it. It’s not just about those pesky rules; the dues are seldom a good deal and it’s often cheaper to buy the various services a la carte. It can also make it more difficult to sell your house to other smart people avoiding HOA’s.

When we moved to southern California from Colorado, I had three must haves in a house: No HOA, owned solar, and no home on leased land which is big in the Palm Springs area.

Adjustable-Rate Mortgages

You can probably guess which way your rate is always going to adjust. The lower mortgage rates are, the less sense an adjustable mortgage makes. Get a fixed-rate loan.

Payday Loans

Payday loans should be a never. The interest rates are sky-high on short term, no collateral loans, and most of the people offering them are sharks. If you are having cash flow problems, then you need to look at your budget, not resort to emergency loans.

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Student Loans

Look, we get it. You’re told going to college will help you fulfill your dreams. The truth is that you should only go to college if you really want to go to college. If your life doesn’t need it, don’t go. If you must go, you can significantly reduce your loans and avoid money traps by doing your first two years at community college.

I saved a ton of money that way. I went to Arapahoe Community College for two years on a full-ride scholarship.

And even though I easily climbed the corporate ladder of a Fortune 500 company without a 4-year degree, I ended up going back to get it because it’s what my Gramma wanted me to do. That was an expensive present for her!

Taking Social Security Too Early

Yes, you can take SSI at 62, but SSI discourages this, substantially. For each year you wait from 62 to 70, your benefits go up by 8%.

Claiming early can permanently reduce your benefits by as much as 30%. Wait until your full retirement age. Also, if you pass away before your spouse, their survivor benefits will be cut.

A person sitting at their computer and working on their personal finances to avoid money traps

Hiring a Financial Planner

Yes, it’s convenient. It’s nice to have somebody else worry about your portfolio. However, most financial planners get their money regardless of whether your investments do well. Which means that they have no actual incentive to act in your best interest. If you are at all capable of managing your own portfolio, do it.

Not Saving for Retirement

You should already be saving for retirement. Yes, no matter what age you are. Now, some people absolutely can’t, especially at a young age, but as soon as you start getting some free cash, start putting it into a separate account for retirement. And keep contributing a set amount to that account every time you get paid.

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Avoiding the Stock Market

Not investing your money means your money is working for your bank, not you. Even if you get interest in your checking account, it’s a fraction of what that money is actually earning.

Bailing Quickly When the Market Tanks

It’s very tempting to start to pull your money as soon as stocks drop. Hold off. You’re better off riding out short term fluctuations. Otherwise, you can easily end up buying high and selling low, the exact opposite of what you need to do.

Killing Your Cash Cows

You’re investing to get money. Putting too much focus on capital gains, however, can be a problem. Capital gain feels good, but almost all stock market returns come from reinvested dividends. In a bull market, it can be tempting, and the cult of capital gains has a huge following. Opt-out.

Overspending on Your Wedding

Getting married? Pro tip: The wedding industry is a huge ripoff. Unless you’re getting financial assistance, keep your wedding small and intimate. For some people, it really is a good idea to elope. A huge white wedding with a hundred or more guests might seem to be a dream, but it’s one day. You need to worry about the rest of your lives (side tip: Rent your wedding dress).

We got married at our home. We had 65 guests, full catering with servers and a chef onsite, an open bar, and dancing for less than $7,000.

Not Keeping a Budget

Too many people have absolutely no idea how to budget. If you don’t budget properly, you will overspend, or forget about tucked away money when you need it. Make sure to track all of your expenses, income, and investments.

Getting Divorced

The national average cost of a divorce is $15,000Each. And that’s just the legal and court costs.

It’s easier if the divorce is uncontested, much worse if you’re fighting over the custody of your children (or the dogs). Then there’s all that wrangling over child support and alimony.

A prenup can help, but the best way to avoid getting divorced is to be careful about getting married in the first place. Think very carefully about whether you have picked the right person to be your life partner and co-parent your children. This is seriously the most important financial decision you will ever make.

There you have it, 17 super common money traps people fall into.

5 thoughts on “Top 17 Money Traps to Avoid”
  1. My favorite is the last one, pick the right life partner and avoid divorce! The right life partner can help magnify your financial and retirement achievements.

  2. Great reminder of things to avoid. I need to figure out a way to get my kids to read this and adopt this line of thinking.

  3. Hmmmm, I don’t fall into many of these traps, by all accounts I should be RICH!! I better go count all the shoes in my closet, that might be where my extra money is hiding! 🙁

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