Worst ways that could deplete your savings

Financing a New Car

We all love the new car smell, don’t we? But if you use your savings to make a down payment on that amazing new car that was just released, you are probably making a mistake. “This is one of the worst ways someone can make their savings disappear,” said Cameron Burskey, managing director at Cornerstone Financial Services. “Not only are you adding a car payment, but you’re also having to pay interest on the financing, as well as increasing your monthly or annual insurance costs.”

Buying More House Than You Can Afford

It’s nice having a house with a big yard or one that’s in a better area with better schools.

And maybe you can tap into your savings to make a down payment. But if you can’t afford the monthly mortgage payment, you could quickly be headed for financial turmoil.

Risky Investments

Risky investments tend to be those that promise outlandish returns, typically many times more than the average stock market return.

Such eye-popping returns can undoubtedly be tempting, but that doesn’t make them good investments.

Never invest more than you can afford to lose — and if you are drawing money from your savings, that’s probably money that is better left in a safer place.

There are plenty of calculators available to help you decide how much house you can afford, such as this calculator from Chase.

Loaning Money

If you have a friend or family member in need, you might be tempted to fire up your savings account and help them with what you can. While that is understandable, what if they never pay you back?

This situation is commonplace, so you shouldn’t lend money unless you can easily replace it. If you can’t, not only do you put your own finances at risk, but your relationship with the person you lend the money to could be put under pressure.

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