Here are 13 common money mistakes and tips to move past them.
Everyone makes mistakes. Learning from them is what really counts.
1. "I live within my means. If I have anything left after paying bills, I put it in my savings account."
You've heard it before: Failing to plan is planning to fail. One of the best ways to reach your financial goals is to develop a strategy to help you get there. Having a plan to follow can help increase your chances of sticking to it.
2. "I've been meaning to enroll in my 401(k) at work but haven't had time yet."
An employer-sponsored retirement plan is a valuable benefit you don't want to pass up. With today's long life expectancies, you could spend 30 or even 40 years in retirement. The amount of time and effort it takes to enroll in your company plan is a small investment that can be well worth it.
3. "Retirement is so far away that I don't need to plan for it now. I'll have plenty of time later."
Retirement shouldn't be a pipe dream. It should be a real event you plan for in your future. And it's never too early to start saving and investing. In fact, the longer you put off beginning to save for retirement, the less you may have at retirement.
4. "I don't have time to review my statements or meet with my financial advisor regularly."
You've taken the right step to start saving and investing. Remember that investing for your future is an ongoing process that requires regular attention and review, and it should change as your life changes. Read your statements and meet with your financial advisor at least annually to help ensure you stay on track.
5. "My fiancé and I don't like to talk about finances."
Engaged couples often spend months planning weddings down to the tiniest detail, yet avoid discussing money at all. Understanding each other's financial priorities and goals, and developing strategies you both can agree on, is essential to a successful relationship.
6. "I have some investments, but life insurance is something I can't afford. It's just too expensive."
Eighty-three percent of consumers say they don't buy life insurance because it's too expensive. But when asked how much they believe it costs, their estimates were nearly three times the actual price.1 If you're still working, your ability to earn income is a valuable asset that you should protect with life insurance. You owe it to yourself and your family to investigate it – and you may learn that it's less expensive than you think.
7. "The only way to make money is to buy and sell stocks frequently."
We believe that constantly looking for today's hottest investment or best deal can actually undermine your success. In fact, history has shown that decisions about when to buy and sell can significantly impact your results.
8. "I don't need growth investments now that I'm retired."
While you probably want to shift to less risky investments when you're retired, forgoing growth investments altogether can expose you to the risk of not keeping up with inflation. The key is finding the right balance of stocks (for growth opportunities) and bonds (for relatively reliable income) to help meet your income needs and help you keep up with inflation.
9. "I don't have time to figure out what I spend each year for health care and dependent care expenses."
Taking advantage of every tax deduction and credit you're eligible for is a money-wise decision. Talk to your tax preparer or visit www.irs.gov to understand the deductions and credits that are available. Make the effort to determine what you spend this year so you're well-prepared when it's time to do your 2016 taxes.
10. "Estate plans are only for people who have a lot of money."
The fact is estate strategies are for everyone and can be as simple as having a will. Without an estate strategy, you have a default "strategy" in place – the laws of your state – that may not align with your desires.
11. "I have a credit card – I don't need an emergency fund."
If you don't have three to six months' worth of living expenses saved in an easily accessible account, now is the time to start working toward that goal. Credit cards are not a good fallback plan – not being able to pay them off could cost you high interest and damage your credit score. And what if your credit limit isn't high enough to cover the emergency?
12. "My debt will never go away, so why pay more than the minimum?"
You may not think you'll ever be able to get out of debt – but you can. Only paying the minimum on credit card or student loan debt, however, may not get you there in a timely manner. Chances are you can find more money in your budget to put toward payments while you cut down spending that keeps adding to your credit card balance. (Do you really need that $5 latte or $10 lunch every day? Such indulgences may seem small but can really add up.)
13. "I don't have enough money to invest."
Investing is not just for the wealthy; it's for anyone who wants to work toward a better financial future. In fact, if you participate in a retirement plan at work, you're already investing. But you can invest more – and you don't have to have a lot of money to start.
1. Source: LIMRA
~ Contribution, Edward Jones Investments.
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As a reminder, this Blog Post is for informational purposes only and is not intended as legal or tax advice.