​​Here Are the 6 Worst Financial Decisions We Found on Reddit

It's always better to learn from other people's money mistakes than to experience them firsthand.

Reddit has several forums devoted to financial topics, where users can get advice and share stories. Not only is it interesting to learn about how other people manage their money, you can also get an idea of what not to do based on the decisions they regret. After reviewing all kinds of personal finance stories on Reddit, here are the worst decisions we found and why you should avoid them.

1. Getting a payday loan

Multiple Redditors called payday loans their worst financial decision, and one even said they had to file bankruptcy because of payday loan debt. What makes this type of loan so dangerous is extremely high interest rates, which can be upwards of 400%. These loans are so predatory that they're actually illegal in many states.

They also have short terms, normally of two weeks. Most borrowers can't pay in full, so their only option is to refinance the loan. That means paying the interest charges and renewing the loan for another two weeks. This often becomes a vicious cycle where borrowers need to keep refinancing and paying costly interest charges, without ever making progress on what they owe.

Trying to pay off one of these loans? Check out The Ascent's guide to getting out of payday loan debt.

2. Buying a timeshare

Name any item that people quickly regret buying, and there's someone on Reddit who has bought it. Boats. Backyard hot tubs. A four-foot plush alligator pillow (seriously). But the one purchase you just about always want to avoid, even if it seems like a good idea at the time, is a timeshare.

It's a tempting proposition. You pay for a place, often in a luxurious resort, that you can use once per year. However, there are normally restrictions on when you can use it. You're also on the hook for maintenance fees, and one Redditor said that these alone can cost as much as a nice vacation. Timeshare owners hardly ever get their money's worth, and to top it off, it's also hard to sell your timeshare if you want to get out of it.

3. Not realizing you need to choose investments for retirement accounts

Sending monthly contributions to retirement accounts is one of the best financial decisions you can make. These accounts have tax advantages and allow you to build a nest egg you can rely on when you're older. Unfortunately, several Redditors mentioned making a critical mistake with these accounts -- not realizing they needed to select investments, too.

To grow your money with retirement accounts, you need to invest that money. These accounts usually have a variety of investment products to choose from, such as:

• Exchange-traded funds (ETFs)
• Mutual funds
• Target-date funds
• Bonds
• Treasury bills

If you don't choose any investments, then you'll just have cash sitting around. It won't grow, so you won't be able to take full advantage of your retirement plan.

4. Maxing out credit cards

This is a common mistake among young adults and anyone who is new to credit cards. Maxing out a card is when you use its full credit limit. For example, if your card has a $1,000 limit and you make $1,000 in purchases, then you've maxed out that credit card.

There are a few reasons maxing out credit cards can be so dangerous. If you can't pay off the full balances by the due date, you'll be charged interest. Most credit cards have high interest rates, so this can be expensive. And once you're in credit card debt, it's often hard to get out of it.

Another issue is that using up your entire credit limit can be bad for your credit score. There are several consequences to having a lower credit score, including getting charged higher interest rates on any loans you need.

5. Going into debt for college without having a plan

One of the more interesting financial mistakes found on Reddit was college-related. Some Redditors regretted rushing into college and taking on large amounts of debt, only to end up without a solid career path. Despite wanting to take a gap year, they felt pressured by their families to continue their education right away.

Of course, college itself isn't a bad financial decision. People with higher levels of education make more money on average. But it's not something to force yourself into, especially if it's going to put you into debt and you're not sure what you want to study yet.

6. Risking it all on longshot investments

We've saved the worst for last, and it doesn't get much worse than losing your life savings on a risky investment. Unless you decide to invest on margin and lose your life savings, plus money you've borrowed.

This isn't a rarity for Reddit, either. It happens all the time on r/WallStreetBets, a subreddit revolving around ultra-aggressive stock trading strategies and a whole lot of memes. Members love to go all in on investments with big payouts and small odds of success.

While a select few luck out, the vast majority don't. r/WallStreetBets never fails to entertain, but the YOLO approach isn't one to copy with your portfolio.

All the financial decisions listed above can be costly and often don't work out well for people. Now that you know about them and why they're so risky, you can avoid making them yourself.