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One of the best ways to keep out of debt is to be mindful of the many pitfalls that are waiting to swallow you up, and how best to avoid them. The problem is, some of these debt traps don't look so deadly until you consider the consequences. Over at Kiplinger.com, they've put together a round-up of common but dangerous debt traps, along with some advice on how to side-step them. Here are the highlights:
1. Binging on Student Loans:
Before you realize that your liberal arts degree will get you a job you don't want and for less money that you'd expected, it's easy to over-estimate one's ability to repay student loans. So while you're able to live well as an undergrad, you could find yourself swamped in debt soon after graduating.
2. Starting a Marriage in Debt:
Chances are you know more than your fair share of divorced people. Ask yourself how much of that marital tension in those former relationships was money-related. While we can't advise that you avoid marrying someone because of a high credit card balance, it is advisable to avoid adding further debt by going hogwild on your nuptials.
3. Co-Signing a Loan:
We've covered this one numerous times in the past, but it always merits repeating: Unless you are willing and able to repay another person's debt, you should avoid co-signing a loan at all costs. Maybe your brother will be angry that you wouldn't help him buy that speedboat, but you won't find your finances sinking when he fails to keep up with payments. As for advice on staying away from this trap, Kiplinger writes, "The only sure way to dodge this debt trap is to just say no when asked to co-sign a loan."
4. Over-Improving Your Home:
Just because you remodel your home doesn't mean that you're going to reap the full benefit of the remodeling when you sell the house. In fact, it could be very tempting to go too far and make changes that might actually hurt the value of your home down the line.