Money pits are like the Hollywood quicksand characters run into in the movies. You usually don't know you've stumbled upon one until you're sinking, fast.
Some money pits are obvious: Purchasing a dilapidated house could lead to a large financial loss, and, of course, misusing credit cards is a surefire way to hemorrhage cash that might have gone into your retirement savings or child's college fund. But almost anything can be a money pit. To wit, here are five examples:
Cars. If you have a tendency to hang onto your car for as long as you can, you'll eventually discover you're visiting the mechanic more frequently than in years past. But when should you decide that enough is enough?
"Never put more into a car than it's worth. If you have $6,000 in repairs, and the car is worth $2,000, sell ... and move on," says Lauren Fix, a Buffalo, New York-based automobile consumer advocate and author of several books on cars.
But sometimes you don't know that you have $2,000 in repairs ahead of you. You may have a $300 problem, and then a $500 fix three months later. Then you might learn you need a $600 repair and wonder if this is it for a while, or if there are more repairs on the horizon.
Fix suggests approaching a trusted mechanic or your dealer and asking for a diagnosis of what repair problems you may run into in the near future. If you don't know who to turn to, Fix recommends RepairPal.com, which includes a list of certified repair shops and a cost estimator.
Education. Most people wouldn't tell you not to get a college degree; a recent Labor Department analysis found that Americans with a four-year college degree made 98 percent more per hour, on average, than people without a degree in 2013. That said, 69 percent of college seniors from public and private nonprofit colleges in 2013 graduated with student debt and owed an average of $28,400, according to the Institute for College Access & Success, a nonprofit organization that works to make education more affordable for people of all backgrounds.
If it's taking forever to get your degree and you feel imperiled by your future student debt, see if your college or university has a free financial counseling program to help you manage your money. You can always look into more scholarships or grant programs, and it may be time to leave the dorm or apartment and live with family or consider transferring to a lower-cost college. After all, your degree may ultimately be worth it, but that doesn't mean your school isn't a money pit.
Lawyers. Attorneys aren't cheap -- $284 an hour on average, according to RocketLawyer.com -- so you might be tempted to declare yours a money pit when you write your first check. But assuming you know that high prices come with the territory, how do you know if you're wasting money on legal services?
Much will depend on your gut and comfort level, of course, but there are some red flags, according to Tim Tarvin, an attorney and associate professor of law at the University of Arkansas.
"If a client is getting billed but cannot get in touch with her attorney, then it's time for her to shop for another lawyer. Conversely, even if the attorney is communicative and responsive but nothing is getting done in the case, it's time to shop for another attorney," Tarvin says.
Relationships. Yes, people can be money pits. You might have a significant other who never says thanks for picking up the tab, or maybe you're always lending money to your financially needy adult son or daughter.
You aren't going to trade in your child for another model, and you may feel your girlfriend or boyfriend is worth the financial strain. But if you resent giving money to someone you care about, nothing is likely to change if you don't speak up and end your banking relationship or come up with a solution to your loved one's money woes.
Starting a business. It isn't easy to start your own business, although the failure rate isn't as high as the 80 to 90 percent you've probably heard cited. According to the Small Business Administration, about half of all new businesses make it to at least their five-year anniversary. About one-third make it 10 years and beyond. Still, two-thirds don't.
If your business is starting to look like an expensive hobby, and you're shoveling your own money into your company without much to show for it, when is it time to call it quits?
You'll probably feel it in your gut. "If you're a small business owner finding yourself month after month struggling and hoping things will improve -- well, you know what the cliché is: Hope is not a strategy," says Shani Magosky, a business owner and CEO of Vitesse Consulting in Fort Lauderdale, Florida.
It also depends on why you're spending your personal money on your business, Magosky says. Are you excited about sinking more of your money into your venture, or do you feel a sense of dread?
"If you're spending the money because you think that there's a huge revenue opportunity to be had and that there's a good chance you'll make your money back, that's a good sign. If this is a last-ditch effort not to go into bankruptcy, then that's not the greatest use of your capital," Magosky says.
In which case, it's probably time to sell your business, start a new one or find another career. That's often easier said than done, but it's worth trying, because one thing is for sure: Money pits are the pits.
