When money is tight, it’s natural to consider all your options for bringing stability to your financial life. While it’s a good idea to compare the pros and cons of every path forward, some are better than others.

A payday loan sounds like a great idea on the surface, but it can actually be one of the biggest financial mistakes you ever make. Here’s why:

1. A payday loan is expensive

On the plus side, most states have laws that govern payday loan fees. However, that’s not good enough when you break down the numbers. Here’s an excerpt from the Consumer Financial Protection Bureau website:

Many state laws set a maximum amount for payday loan fees ranging from $10 to $30 for every $100 borrowed. A typical two-week payday loan with a $15 per $100 fee equates to an annual percentage rate (APR) of almost 400 percent. By comparison, APRs on credit cards can range from about 12 percent to about 30 percent.

Numbers like those should be enough to scare you away from obtaining a payday loan. It’s simply not worth the price.

2. There’s a good chance of entering a “debt cycle”

A payday loan often leads to a debt cycle that’s difficult to break. Every time you pay back one loan, you secure another. While this works out well for the lender, thanks to fees and interest charges, it puts you in a cycle that quickly bogs down your finances.

If you can’t live without a payday loan, the lender has the upper hand. The best way to get out of a debt cycle is to avoid it in the first place.

3. It doesn’t help you build credit

It’s a common myth that payday loans help you build credit. This isn’t true, as your activity is not reported to credit bureaus.

The best you can hope for is that your lender eventually allows you to borrow money at a lower rate. But as you can imagine, that’s not much of a consolation.

Now do you see why you should avoid payday loans at all costs? Consider other options before you even think about this last resort.

When you’re in desperate need of money, such as to repair your home or car, it’s common to consider all lending options available to you. And for many individuals, this means coming to terms with a loan shark.

Predatory lending isn’t something you want to get involved with. Even if it seems like your only option upfront, it won’t be long before you regret your decision to go down this path. Here are three reasons why this is a bad idea:

• High cost of borrowing: One of the primary drawbacks of a loan share is the high cost of borrowing that results from higher than average interest rates. Since they’re not regulated by the government, unlike traditional lenders, they can get away with this.
• Unclear terms and conditions: Loan sharks make it difficult for you to understand what you’re getting into. And when that happens, it’s possible that you could agree to a loan that’s not in your best interest.
• Potential for harassment: This never crosses your mind when borrowing from a traditional financial institution. Even if you default on your loan, you’ll never feel like you’re being harassed. Loan sharks, on the other hand, could take things too far. Should that happen, you may begin to feel like your personal well-being is at risk.

These are just a few of the many reasons why dealing with a loan shark is a bad idea. If you’re thinking about this kind of borrowing, take a step back and look into other options such as a personal loan, credit card cash advance, or a loan from a family member.

Even when money is tight and there doesn’t appear to be another option, getting involved with a predatory lender isn’t likely to help. You’ll end up in a worse spot in the long run.

Creating a budget is a big step on the path to a better financial life. However, maintaining your budget is even more important. Even if you start with good intentions, over time it is possible to get off track if you don’t know what you are doing.

To ensure your success, here are three traits that will help you stay the course:

1. Motivation. Are you motivated to do the right thing in regards to your money? Do you realize that things will happen, good and bad, over time that will impact your situation?

No matter what happens, you must stay motivated. If you continue to push yourself, one day after the next, you will eventually reach your financial goals. When this happens, the excitement you feel will be enough to keep you motivated well into the future.

2. A positive approach. If you go into the budgeting process with a bad attitude you are never going to reach your goals. Instead, it is likely that you will find yourself giving up sooner rather than later.

You may face challenges here and there. You may realize that you have to put additional time into your budget. As bad as things may get, keep a positive attitude. This will help to push you along, allowing you to maintain your budget.

3. Be realistic. For many people, unrealistic expectations derail them before they ever have the chance to succeed. There is nothing wrong with expecting big things from your budget, but you have to remain realistic when setting goals. If you don’t, you will only become discouraged.

Tip: make a list of multiple short term goals, all of which are attainable. This will help you realize what a realistic goal looks like, allowing you to better plan for the future.

When you have these traits, it becomes much easier to maintain a successful budget. Soon enough, you will look back and wonder why you faced so much trouble in the past.

Source: Michael Solari is a certified financial planner and principal owner of Solari Financial Planning. From personal financial planning to college funding advice to estate planning, he knows it all.

While some people understand the importance of finding a local financial planner they can trust, others continually overlook this and hope for the best.

You are not required to hire a financial planner, but those who have found somebody they trust almost always feel better about their finances over the long haul.

Like many, you may be struggling with the process of locating a financial planner in your area. You need help and are willing to take advice, but you don’t want to trust your time, money, and future to just anyone.

To put your mind at ease, one of the best things you can do is search solely for certified financial planners in your area. This goes a long way in separating the pretenders from the professionals who can truly help.

The Process of Getting Started

Before we get into some of the finer details with Solari, let’s take a closer look at what the process of getting started entails.

On the Solari Financial Planning website, the basic process of getting started with a financial planner is outlined. Here are the steps:

• Initial inquiry
• Meet to get acquainted with one another
• Data gathering
• Set short and long term goals
• Analyze and create a plan for the future
• Review your personal financial plan
• Implementation

While this process is not going to be exactly the same from one financial planner to the next, this is the basic outline of what you can expect along the way.

Hiring a Financial Planner

Now that we have all that out of the way, here are some of the questions I asked Solari, complete with his detailed answers:

1. What are the primary benefits of working with a financial planner?

The primary benefit of working with a financial planner is having someone guide you toward your financial goals. Whether the goal is to get out of debt, prepare for retirement, fund college for your children or whatever the goal may be, a financial planner should help you identify your goals, organize them, create a custom plan and help implement. It can very often be too much for an individual to grasp all the concepts and much easier to hire a professional. Once you have a game plan in place it is important to check in with your financial planner to make sure everything is on track because life changes very fast for most people which can affect their goals.

2. What are the most common mistakes people have made before hooking up with you?

I usually see 2 mistakes. The first, many people wait too late. This is particularly true with people approaching retirement. They have waited too long to save for their retirement and now have to face tough choices. If you start saving early, it can make a world of a difference in the long run. The second mistake is people not implementing the advice they receive. A survey done last year by TIAA-CREF, stated that only 1/3 of the respondents said they took action after receiving advice (https://www.tiaa-cref.org/public/pdf/TIAA-CREFAdviceSurveyExecutiveSummary.pdf). Advice seekers who do not follow through on a plan may never achieve their goals.

3. How do you suggest people find a financial planner in their area that they can trust?

There is a lot of noise in the financial services industry. It is only going to get louder as more and more baby boomers start to retire. To help filter out this noise, I first would make sure that my financial planner has their CFP(R) designation. This means they are dedicated to the profession by having passed a rigorous examination, experience and continuing education. The second criteria would be to make sure that my financial planner is “fee-only.” A fee-only financial planner works differently than a “fee-based” or “commissioned” advisor. A fee-only financial planner is paid solely by their clients. They have made a commitment to act in their client’s best interest by not accepting compensation from 3rd parties like commissions on insurance or investment products (fee-based and commissioned advisors do receive compensation from 3rd parties). Fee-only financial planning firms come in all shapes and sizes but you can search for one near you on napfa.org or garrettplanningnetwork.com. Many advisors will sit down with you for free to make sure it is a good fit for both parties.

Final Thoughts

It doesn’t matter if you are currently working with a financial planner, have never considered this, or are in the process of finding a local professional, this advice will definitely point you in the right direction.

Even if you don’t meet with a financial planner in the near future, you should now have the confidence to make an informed decision when/if you decide to do so.