These are errors you need to avoid at all costs.

We constantly warn consumers not to waste money for good and obvious reasons… you’ll have less of it “duh!” But it can never hurt to remind yourself occasionally that financial ignorance and errors can also cost you financial freedom and peace of mind.

Fact is when it comes to money mistakes that can get you into serious legal trouble; we can vouch that the possibilities are endless.

This isn’t the ultimate comprehensive list of money mistakes, but listed are a few examples you’ll want to be careful about not making yourself.

Be aware when signing paperwork 

This should be a financial commandment: READ WHAT YOU ARE SIGNING FOR!

I have yet to determine how co-signing for a loan is a good idea, it really isn’t. I’ve seen too much proof to the contrary to make me change my professional opinion.

If the individual you stood surety for doesn’t pay it back, you’ll be held legally liable to pay the loan back.

Be advised that depending on how thorough the loan agreement is structured, and if you’re dealing with a bank you have no chance, the credit provider may come after your assets without going after the original loaner.

Here’s good advice and take a few days to really think about signing any form of surety. If you have a twinge of doubt that the individual will default on the loan, DON’T DO IT!

But, maybe, you know this already…hopefully. However, sometimes people take on a loved one’s financial obligations without fully comprehending what they’re getting themselves into.

The only time you should think about standing surety for someone, is with the mindset that if the individual doesn’t pay, you are fully prepared to pay for their mistake. If you are prepared to do this then go right ahead!

Think carefully about mixing personal wealth with business assets

It’s an age old adage “don’t mix business with pleasure”, and it’s a statement that I can vouch for 100%.

Quite a few self-employed individuals get themselves into serious legal ramifications when they treat their business account as their personal bank account.

So what’s the problem? Your being dramatic Scott! NO! No I’m definitely not, so let me break it down for you.

If you get sued, for whatever reason, as an individual you open yourself up legally. Meaning that the corporate veil can now be pierced and your personal assets are then exposed to liability.

Think about it logically. You can’t argue in a court of law that your personal assets shouldn’t be handed over to the individual or company suing you if for years you’ve been using your business bank account as your own personal piggy bank or spending your own personal finances on your business. You can’t decide to separate the two worlds the moment an attorney comes after you. Well…you can “try”, but you’ve made proving your case extremely hard the best of luck to your attorney.

SARS also doesn’t like it when you mix personal and business assets. You’ll know all about it one day should you need to liquidate or sell your company. Whatever you think you’re saving on Tax now will catch up to you in the long run, you can bet money on it…and you are.

Be diligent about doing your tax returns 

Since I brought up SARS–  the first thing you need to do is get rid of any misconceptions you have about the taxman not knowing, or being as clever as your personal accountant, or you for that matter. Let me put an end to that delusion, THEY KNOW EVERYTHING!

So unless you have a genius accountant that has doctorates in numeric literacy and financial accreditations longer than you are tall, you’re not going to get away with cheating SARS.

And if you think you can personally challenge an institution that hires experts in their myriad and diverse fields, go right ahead! Let me know how it turns out for you.

Most accountants and financial experts will tell you that you aren’t likely (emphasis on “aren’t likely”) to go to jail if you mess up with your taxes, which is true enough. I mean you didn’t intentionally try to hide assets and an extra revenue stream from SARS now did you? That was someone else, not you! Yeah ok sure, sure.

You need to understand that with the full weight of the law behind them, and that’s the South African Government people (because our economy needs revenue now more than ever), SARS can certainly help “liberate” your finances from your bank account for tax penalties – and “yes” in extreme cases, send you to jail for tax fraud and evasion if you don’t comply with their mandates.

So like my father used to say to me growing up: “I’ll show you CLEVER BOY!!!”, and it was always a painful lesson to learn, but well deserved. So don’t get clever with the taxman.

Loaning money to friends and family

Never have I seen family bonds and friendships destroyed faster than due to the cause of money. Let’s be honest, we all can recall sometime or another, that this has happened in our inner circles and its ruined ties.

The upside is you don’t have to worry; you won’t get into trouble with the law by lending family and friends money.

What you need to know and completely comprehend is if you don’t properly document the loan, you won’t be able to proceed with legal collection methods to get the money back. That’s if you ever wanted to go that route, and that’s where relationships start to get destroyed and I speak from experience.

If you’re making the loan with the full intention of being repaid, then the loan agreement should be written out and signed by both parties, what you’ll be looking at most likely is an “Acknowledgement of Debt” agreement. Such is readily available to download off of the internet.

Be advised that courts will not enforce loans made without proper legal documentation, regardless of it being a personal loan matter. The court will expect to be furnished with documented proof of payment, an EFT proof of payment or a signed invoiced receipt of the money changing hands. The court will also expect to see a structured loan agreement held between both parties and it must be signed as proof of consent of the debt by both parties.

Otherwise it’s a matter of “he said, she said” story and that will not hold water in a court of law.

Of course, as I mentioned previously in regards to co-signing loans, the same sentiment carries through towards loaning money to family or friends.

If you are ok with the expectation of never being paid back, that you’d never do anything to hurt your relationship with this individual, then go right ahead and lend the money.

Anybody seeking debt advice can contact OUDS on 079 980 0822, for free assistance, help, or more information or visit our website.

Remember above all else that you are not alone out there. Contact OUDS directly for more information on our effective Phalanx services.

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