Skip to comments.10 Scariest Money Mistakes -- Don't be Tricked!
Posted on 10/23/2013 5:36:50 AM PDT by Kaslin
Dear Readers: As careful as you might be in managing your money, there are certain mistakes that can sneak up on you. You might be tricked into thinking they're no big deal, but even seemingly small mistakes can have some pretty disastrous results. Here's my list of the 10 scariest money mistakes -- and what you can do to avoid them.
1. Living beyond your means. When was the last time you put something on a credit card because you didn't have the money to buy it? Or how often have you chosen a high-priced item when a lower-cost version would work just as well? Do this regularly and you can easily end up with a stack of bills and not enough money to cover them. The solution? Create a budget you can live with. Divide your expenses into two categories: needs and wants. Put dollar amounts beside each entry. Then, add up your income. Can you cover everything? If not, you need to prioritize. Pay for all the necessities first, then pick and choose the extras you can handle with cash. You'll enjoy them more -- and you won't have to fear the bill.
2. Putting retirement last. Retirement doesn't seem so scary when it's far in the future, but when you're staring it in the face with very little savings, it can make you turn as white as a ghost. So put retirement first -- even before saving for a house or a child's education. Contribute at least enough to your 401(k) to capture any company match. If you don't have a 401(k) -- or even if you do -- open an IRA and contribute as much as you can toward the yearly maximum. The earlier you start, the more time you have for your savings to grow.
3. Not having an emergency fund. Have you ever been faced with a medical crisis or a job loss? These are emergencies that can really make your hair stand on end if you're not prepared. Ideally, you should strive to have three-to-six months of necessary living expenses easily accessible in a savings or money market account or short-term CD. In retirement, it's wise to have at least a year's worth of cash set aside to cover expenses.
4. Carrying credit card debt month to month. Let's say you have a $5,000 balance on your credit card and you're making the minimum monthly payment (usually interest plus 1 percent). It would take 264 months (22 years!) to pay this balance off. Plus, you'd end up paying $5,330.33 in interest -- double the amount you initially spent. Those numbers are pretty terrifying! Always pay as much as you can each month to bring your balance down quickly.
5. Letting health insurance lapse. A 2011 study by the International Federation of Health Plans reports that the cost of a one-day hospital stay in the United States can range from around $1,500 to over $11,000. Scared yet? Now add in things like doctor's fees, surgery and special tests. A single illness or accident could wipe out your savings. The Affordable Care Act requires everyone to have insurance. And from a purely financial standpoint, it's essential.
6. Trying to time the market. Market swings can spook even the most experienced investors but try to keep your emotions under control. It's nearly impossible to always buy low and sell high -- or to get in and out of the market at just the right time. In fact, you could lower your returns substantially by staying on the sidelines and missing just a few days of a market upswing. It's best to take a long-term view and stay true to your goals, no matter what the market is doing.
7. Taking on too much student loan debt. Defaulting on a student loan can result in financial damage that can last a lifetime. Penalties and interest add up, your credit rating goes down -- even bankruptcy doesn't erase the debt. So think before you borrow. A good rule of thumb is to limit the amount to what you can reasonably expect to earn your first year of work.
8. Not having a will if you have minor children. A will is the one place where you can specify who will be the guardian for your children should something happen to you. If you don't, the state will decide who takes care of your kids. That's a scary thought.
9. Taking Social Security too early, especially in a low interest rate environment. For every year that you delay collecting benefits between the ages of 62 and 70, your monthly check will increase between 6-2/3 and 8 percent. That's a pretty great return, especially when interest rates are hovering around 1 percent or less. If you don't need the money, and longevity genes are in your family, it's probably wise to wait.
10. Not talking to your spouse about your finances. Money differences are famous for tearing couples apart. So before either your bank account or your relationship is jeopardized, have an honest discussion about your expenses, credit and debt, savings goals, and retirement.
Avoid these mistakes now to help build a more financially secure future.
The other one I disagree with is taking SS too early. Not if you've saved for retirement and can live without that monthly SS check. In that case, there's no such thing as taking your SS too early. Get it while you can - the government will be means testing you out of it. Maybe this way you can get back most of the principle you paid into it.
They won’t have to tax your retirement savings, they will just inflate it away. That leaves no fingerprints, but they steal the money just as effectively.
For sure....I went on at first opportunity. When I retired 11 years ago, my cash money market accounts were earning around 8% - enough to live on; those rates evaporated quickly.
Remember when President Bush wanted to give the people the choice to invest on their retirement but was ridiculed by the left?
Excellent points! My husband and I have lived by these rules and are now well positioned for retirement.
As far as when to take Social Security, do retirement calculations to determine when to best take it. We’re going to delay a bit so as to keep our income down so that we can convert a portion of our conventional IRA’s to Roth IRA’s at a lower tax rate.
What about responding to that email from Nigeria?
Number nine does not agree with my research. One would have to be 84 years old to start seeing more money than taking money starting at 62. Also, anyone here think the dollar will stop declining in value??? Does anyone think it will increase in value? Does anyone think inflation will never surge? Does anyone actually believe that Socialist Security will survive anyway?
“The other one I disagree with is taking SS too early. Not if you’ve saved for retirement and can live without that monthly SS check. In that case, there’s no such thing as taking your SS too early. Get it while you can - the government will be means testing you out of it. Maybe this way you can get back most of the principle you paid into it.”
Absolutely right on. Run the numbers. To be ahead from waiting, you have to reach 75 or older, and then for several years, it gains you only a small amount of dollars. The dollar difference is not significant until you reach mid-eighties.
By then, SS has to collapse, or it’s likely you’ll die before then. Sure you’ll live to mid-eighties? Go ahead.
#8 is a biggie. My dad’s parents died when he was 13. Orphans Court took control of all their assets. His grandfather came to raise he and his sister, but frequently the cupboard was bare as they constantly had to fight battles with bureaucrats and court-appointed social workers to get access to the money.
Yes, I do. Right now though I'm focused on 0 telling us, "Nobody needs more than 2 million dollars in retirement savings." I want to scream it from the rooftops - the government has its greedy eyes on your IRA's and 401k's. Obviously, all our private property is at risk in this environment, but tax advantaged retirement accounts are especially vulnerable.
***9. Taking Social Security too early,***
Bunkum! You may not live long enough to enjoy a retirement if you don’t.
I was working the worst 12 hour rotating shifts I have ever experienced. When I turned 62 I retired, took the less SS amount and bailed out. If I had not, I would be dead from exhaustion by now.
The only reason the SSA, AARP and other retiree organizations want you to stay till 65 or longer is to keep you paying into the system where your money goes to the earlier retirees.
RUY’S Rules of Retirement...
When you decide to retire, work all the overtime you can and pay off ALL DEBTS!
Stash as much away as you can, don’t go on spending sprees.
If you have to work after retirement, get a simple stress free job. Smiling at customers coming into Walmart is not that bad if you need a little extra. Certainly beats a high paying stressful job with the Plant Manager from HELL.
***Remember when President Bush wanted to give the people the choice to invest on their retirement but was ridiculed by the left?***
If I could have done that I could have retired at 50 and be rolling in retirement dough!
20 years of 401K did better than all of my 45 years of paying into Social Security, even with the heavy losses back in 2008.
I haven't received any emails from Nigeria since the Obamacare website launched 10/1.
You can still work if your able to, after you retire.
This sounds like the usual naive pap spewed by financial advisors...
I wished my husband and I had been young enough to do so, but we were already retired and on SS at that time
#9? When you turn 62; grab it...get what you can back in YOUR pocket before the whole system implodes.
...now THAT’s good advice!
Speaking of email from Nigeria. Has anyone ever gotten a Freepmail from Nigeria. I have received 2. Next time I do I will post here in this forum
The government giveth, and the government can taketh away.
Non-taxed savings accounts like Roth IRAs are great, but when the balances in the non-tax accounts match those in the taxable accounts, I don't trust that the government will keep its promise to not tax thos accounts. In fact, one way or another, they'll get their hands on it.
They're still p*ssed at 'lowbridge'...
My company matches 100% up to first 10% of salary. It's given me a chance to build up savings the past 3 years. Over the past year, I've basically been my own banker, borrowing from it to fund home improvement projects. I'm paying myself back at 2 1/2%, and I don't have to put up with bankers turning my loan app down.
I'll turn 60 next year, and I'm really considering taking SS at 62. My attitude changed during my vacation a few months ago. My 11 YO son and I took a 2 week road trip to Vegas via Southern Utah. Seriously, I didn't want to come back.
Within a year to 18 months, the only debt I'll have left is the mortgage, and we're doing a refi @ less than 4%.
It won't be a problem staying active: 11 YO son, 3 YO grandson, and Tea Party politicians are going to need lots of boots on the ground.
Now lets hear/see your advise
If you follow number one on this list you will be ahead of a large portion on the US population. The only debt I have is a house mortgage. Unfortunately due to relocating, and crappy housing market, I took a huge hit on my last house that I also have to pay off (second mortgage). So we are very tight at this time, but will still manage to spend less then I make.
I drive old beat up vehicles, and don't have lots of extras, but I also don't take government handouts. (that I am sure I qualify for) My wife and I do just fine on one income, and a family of six.
BTW I plan to fully retire at 55.
We had a man who retired young at 55 from our company. He took his 401K and cashed in his pension plan, then went on a spending spree!
Last I heard he was busted and back at the plant begging for his old job back. He had to start at the bottom entry level pay all over again.
I should add that the Indian casinos in Oklahoma loved him.
Where did you disappear too?
I’m busy...I said this sounded like the usual pap, and it is. You disagree? Fine.
yes! honestly, i thought this article was going to be about those types of things... i do not think "scariest" is fitting for this article...
To those of us who are naturally frugal and conservative with our finances, it does sound naïve.
But many of these items are exactly what naïve people need to hear. I don't consider anything that my wife and I have done to secure our future to be anything out of the ordinary.
But to those who don't understand how to be responsible for themselves, these things are not obvious. Many young people today look at their own situation and convince themselves that securing their financial future is impossible.
They don't have anything and don't think they ever will. They see people who are better off and find hundreds of reasons why they can never do as well. This thinking is then used to justify violating all of the principles of responsible personal finance.
Their decision to be irresponsible becomes a self-fulfilling path to a lifetime of poverty.
Agreed...but these strategies should be posted in more fertile ground...Slate, Huffington Post, Daily Beast and so forth. Anyone who follows Townhall already knows these things. I don't believe #2 or #9 are good ideas...not anymore.
Your average irresponsible liberal doesn't want to hear advice which contradicts their belief that the "have-nots" are being held down by the "haves". They'll stop buying if the ideas presented offend them.
I think it's still good advice to take 401k matching funds. As for Social Security, I took it the moment it was available. Many of the women in my family have lived to near 90. The second oldest living male in my family is ME at age 65. My uncle is 75. I intend to enjoy every minute of drawing a smaller check in my later years.
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