Life Kit: Don't Make These Financial Mistakes

Release Date: July 21, 2025
Host: Mariel Segarra
Guest: Yanelli Espinal, Financial Educator at NextGen

In the "Don't Make These Financial Mistakes" episode of NPR's Life Kit, host Mariel Segarra sits down with Yanelli Espinal, a dedicated financial educator at the nonprofit NextGen. Together, they explore common financial pitfalls and provide actionable strategies to help listeners navigate their personal finances more effectively.

Overcoming Personal Debt

Yanelli Espinal opens up about her personal struggles with debt, offering a relatable story for many listeners. Reflecting on her journey, Yanelli shares, "I was gonna make my last credit card payment... like I was going to be debt free on that day" [00:50]. This determination was her "North Star," guiding her towards financial freedom.

She emphasizes the importance of self-compassion in financial recovery, stating, "It's okay that I made a bunch of mistakes... But now that I know better, I'm doing better" [01:28]. Yanelli's message encourages listeners to learn from their financial missteps without harsh self-judgment.

Common Mistakes When Borrowing Money

Understanding the Borrower-Lender Relationship

Yanelli delves into the often misunderstood dynamics between borrowers and lenders. She explains, "They don't realize that this relationship isn't like they're going to help me and give me free money... they're running a business and they're going to make profit off of me meeting a loan" [04:23]. Many borrowers approach lending institutions without recognizing that loans are profit-driven transactions, not acts of charity.

Advice: Mariel summarizes Yanelli's point by saying, "So it sounds like the advice or the takeaway there would be to shop around" [05:13]. Yanelli reinforces this by urging listeners to "comparison shop 100%" when seeking loans [05:13], ensuring they find the most favorable terms available.

Choosing Credit Unions Over Major Banks

Yanelli highlights the advantages of credit unions, noting, "Credit unions are notoriously known historically for giving better interest rates on loans" [05:34]. Unlike major banks, credit unions are member-owned, allowing them to offer lower interest rates and more personalized service.

Advice: She recommends establishing a relationship with a credit union early on, stating, "It's a good idea to establish an account with a credit union a little before you know you're going to need to borrow money" [05:34]. This proactive approach can lead to better loan terms and financial support when needed.

The Risks of Co-Signing Loans

Co-signing a loan might seem like a generous gesture, but Yanelli warns of its potential dangers. She shares a personal anecdote, "I had a God sister a few years back who was trying to go back to nursing school, and she asked me to cosign a loan for her" [07:54]. When the loan wasn't repaid, her credit suffered as a result.

Advice: Yanelli advises listeners to offer support without co-signing, suggesting, "I can sit down with you and try and help you find a loan for people with a lower credit score" [07:54]. By assisting others in more sustainable ways, you protect your own financial standing while still being supportive.

Making Money on Your Money

Utilizing High Yield Savings Accounts

A significant oversight many make is not maximizing their savings potential. Yanelli points out, "80% of Americans are not using a high yield savings account... cash sitting in that traditional savings account is barely making any interest at all" [09:10]. Traditional savings accounts often offer minimal returns, leading to the erosion of purchasing power due to inflation.

Advice: She encourages listeners to switch to high yield savings accounts, particularly those from online or mobile banks. Yanelli reassures, "As long as you do that, there's no reason to think that there's something shady going on" [09:10], emphasizing the safety provided by FDIC or NCUA insurance.

Smart Investing Strategies

Yanelli cautions against investment decisions driven by hype and speculation. She explains, "When you pick stocks, you're trying really hard to predict the future... it's stuff that could really go wrong and you could lose that piece of your account" [13:51]. Investing in individual stocks based on trends can be risky and unpredictable.

Advice: She recommends a balanced investment approach: "80% of my money I invest in the tried and true approach... The other 20% I'd dabble in things that I think are hot and cool" [13:51]. By allocating the majority of investments to stable funds and a smaller portion to higher-risk opportunities, investors can mitigate potential losses while still allowing for growth.

Taking Advantage of Employer-Sponsored Retirement Plans

Employer-sponsored retirement plans, like 401(k)s, offer significant benefits that many overlook. Yanelli emphasizes, "If you take $1,500 of your pre-tax income and then you'll put that into your account, but then your company is going to match it" [13:09]. This match is essentially free money that can significantly boost retirement savings.

Advice: She urges listeners to fully utilize these plans, stating, "If you don't put anything in the account at all, well, then you're basically saying, I don't want $1,500 for my company" [13:09]. Taking advantage of employer matches can exponentially increase retirement funds over time.

Avoiding Lifestyle Inflation in Budgeting

As income increases, it's tempting to elevate one's lifestyle proportionally. Yanelli warns, "They got to do the things that people in this lane do... the excess money... disappears literally right away into thin air" [15:26]. This phenomenon, known as lifestyle inflation, can lead to living paycheck to paycheck despite higher earnings.

Advice: She advises maintaining disciplined budgeting practices, prioritizing savings and investments over new expenditures. "You also deserve to have a dignified retirement... It takes a generation to create generational wealth" [15:26], Yanelli emphasizes the importance of long-term financial planning over immediate gratification.

Conclusion and Recap

Mariel Segarra wraps up the episode by summarizing the key takeaways:

• Shop Around for Loans: Don't accept the first loan offer; compare rates and consider credit unions.
• Be Cautious with Co-Signing: Understand the risks and offer alternative support if needed.
• Maximize Savings and Smart Investing: Utilize high yield savings accounts and adopt balanced investment strategies.
• Utilize Employer Benefits: Fully contribute to employer-sponsored retirement plans to take advantage of matches.
• Control Lifestyle Inflation: Maintain disciplined spending habits to ensure long-term financial security.

This episode of Life Kit, produced by Sylvie Douglas with contributions from Meghan Cain and Beth Donovan, provides invaluable insights and practical advice to help listeners avoid common financial mistakes and build a secure financial future.