Forrest Gump reminded the world that “stupid is as stupid does.” Unfortunately, this truism isn’t just limited to folks who swim in the shallow end of the IQ pool. Really smart people can do dumb things too, and among the most egregious have to do with money. Here are four of the most self-destructive financial blunders that some otherwise highly intelligent people make:
1. Informally loaning money to family and friends and expecting to get it back.
Giving money to family and friends is (usually) generous and noble. But informally loaning money to family and friends is, well, stupid — because there’s a good chance that most or even all of it is never coming back. The solution to this isn’t necessarily to have a “no loan” policy. Rather, it’s to make things formal. That means contracts, signatures, witnesses, initials — and the whole deal. Any friend or family member who balks at going through this simple administrative process is holding up one of those giant LED lobby signs that reads: “what, you really and truly expect me to pay this money back!?”
2. Playing — and losing — the credit card rewards game.
You know who loves credit card rewards more than anyone? Credit card companies do, because they make millions of dollars from cardholders who think that they’re shrewdly gaming the system, only to discover that they’re being played — i.e. they buy stuff they don’t want or need in order to avoid losing rewards. The advice here isn’t to abandon the credit cards reward game. It’s to make zero assumptions and clearly understand the rules well in advance.
3. Putting money above health.
Lao Tzu sagely advised that “health is the greatest possession.” Unfortunately, some smart people only realize the raw truth of this after they fall ill — because they spent so much time and energy making money, money and more money. Yes, making money is important. If you do it the right way for the right reasons, it’s also enjoyable. But it’s a means; not an end. Folks who put money above their health often discover that they need to spend the former to try and regain the latter. Isn’t it smarter to just to eat nutritious foods (did someone say rice bowls?), get enough sleep, exercise, and avoid getting stressed out and burned out in the first place?
4. Not having a will.
Sorry if this is on the grizzly side, but the fact remains that a staggering number of smart people leave this world for the next, without bothering to create a (bulletproof) will. Who benefits when this happens? The government and estate lawyers. Who loses? Family members, friends, charities, and other worthy beneficiaries who either get nothing, or must fight for a piece of a shrinking financial pie. That’s not the kind of legacy that anyone wants to leave behind!