Have you ever heard of the Dunning-Kruger effect? This is a bias that’s been observed by scientists, where people who don’t know much about a subject overestimate how much they know. In other words, people who know absolutely nothing often convince themselves that they know everything. One area where people seem particularly susceptible to the Dunning-Kruger effect is finance. A lot of people don’t really know much about money, but they convince themselves that they do, which leaves them susceptible to get-rich-quick schemes and bad investments. Worried you might be one of those people? Check out our list of stories gathered around the web about people who made financial decisions only to realize later that they were not as clever as they thought they were. See if you’ve made any of the same mistakes.
Just Say No
Of all the dumb mistakes that you could make with your money, cosigning on a loan is really close to the top of the list in terms of sheer bad idea-itude. I get it; your boyfriend or sister or nephew begs you for some help, and you trust them not to fall behind on their payments. So that’s OK, right?
Wrong! It is always dangerous to cosign on a loan for another person, because, as this story shows, if they stop paying, you could be on the hook for paying a lot of money for something that you don’t even own. It even says in the Bible not to cosign on a loan. So make up your minds now: if somebody asks, you’re just going to say no.