High price of spending money you don’t have

I’d be a rich man today if not for some stupid mistakes. And a lot of late video fees.

First, if I could, I’d go back and destroy my credit cards. Or at least not use them. Or at least, not use them so much, except maybe for emergencies. Oh, and to build credit history. And to get that new flat-screen TV. I’ll just pay extra on it the next few months and …

Geesh! See?! Credit is evil.

Sure, get that Xbox now rather than saving for it. But thanks to the wonders of interest, you pay $500 dollars over many years for a $150 item.

Another valuable thing I’ve learned is to not get full insurance on an older car, just get liability. After paying thousands to the insurance company, I was offered the low-end market value (minus deductible) of $475 to replace my reliable, sporty and utterly totaled ’92 Nissan.

Yeah, right. I’d have been better off putting those thousands into savings.

However, if you’re in a car accident and not at fault, settle through the other person’s insurance company. Just be sure not to sign away your rights until you get what you need.

On the housing front, I had to pay a lease-break penalty of $1,840 just to move out. How sweet of them, not wanting me to leave. But I won’t be signing long-term leases for a while.

In my case, their actions were legal, if harsh. But if you feel that a landlord is trying to mess with you, or you have questions regarding your lease, check out your state’s landlord-tenant laws.

Few evils compare to banks, however. I admit, while living paycheck to paycheck, I spent more than I had in my checking account a couple times, especially on days before pay day. But the bank isn’t satisfied to penalize you fair and square. Oh no.

Banks love to charge fees for everything of course. Twice, my bank tried to charge me an overdraft charge on an overdraft charge.

But their true evil genius is in the order they choose to process your daily charges and deposits, often completely ignoring the actual order these transactions took place in.

Say you make four $1 purchases, and later a $40 purchase, then a deposit. The policy at most banks is to deduct the pending $40 charge first from your balance, even if it hasn’t cleared yet. Oh look, you’re in the negative. Then it will deduct those earlier $1 charges, and apply overdraft charges for each. Then it will consider any deposits.

So you wake the next day and have to pay the bank $152 in penalties on $4 in purchases. What a great feeling.

Personally, I think this should be illegal. But in the meantime, a savings account, besides being a good idea in general, will usually protect you against overdraft charges.

While you’re at it, start a 401(k) or other retirement plan. Today. Seriously.

Let’s say you start investing $100 a month at age 24, for just 10 years. Under certain rates and plans, you’d retire with about $197,000 in your account. Now let’s say you wait until you’re 35 instead. With the same rates, plans and $100 a month, you’d invest for 30 years and only end up with about $140,000. Such is the power of interest and stocks over time.

Finally, for those of you unfortunate enough to be hassled by a collection agency, don’t let them bully you. You have rights. Learn them, enforce them.

Relatively speaking, my woes have been minor, and some of these lessons obvious. Mostly, I fell into the trap of “the more I have, the more I spend,” rather than saving anything. But if only I’d known then …

Randy Henderson is a writer for NEXT, a Sunday opinion page in The Seattle Times, and a senior at Washington State University. E-mail: NEXT@seattletimes.com