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So many of my posts are suggestions and recommendations to do what is financially right. Today I thought I’d head in a different direction and highlight some common financial wrongs. Here is a list of seven of the most common money mistakes I’ve run into, and I’m sad to say I’ve even committed a few of these myself!
- Not Considering the Financial Consequences of Student Loans: It’s so very easy to want to go to a certain college or institution or to get a specific degree, but will you really be able to get a job that pays enough to justify the expense? Far too many people sign up for mounds of student debt without considering the monthly debt payments and the length of those monthly debt payments versus their expected incomes when they are trying to decide what college to attend and what degree to obtain. It’s also important to make sure an advanced degree will equate to enough additional earnings to justify the expense.
- Postpone Saving: If ends are meeting, but there’s not much leftover, it’s easy to fall into the rut of saying that you’ll start saving just as soon as you can. This is dangerous because life magically seems to always be getting more expensive. No matter your income or lifestyle, finding a way to save a little each month is really the only sure-fire way to get ahead and make financial progress towards your goals.
- Too Much Car: Even after thoughtfully considering your finances and researching cars online, after taking a test drive at a dealership it is really easy to crave the better model with the premium wheels and entertainment package. Get what you need, not what you don’t. Additional money spent on a slightly nicer ride could go to a lot more critical financial goals such as establishing a rainy day fund or saving for retirement.
- Rush to Buy a House / Too Much House / Furnish Too Well Too Quickly: Buying a home too quickly can really strain a person’s finances. The goal should not be to live like you want to eventually live when you retire; the goal should be to live. Just like buying too much car, buying too much house is also really easy to do. Being a new homeowner brings a list of new expenses, large monthly mortgage payments can be daunting, and you can’t always count on the price of real estate going up. As you are furnishing a house it’s important to go at a reasonable pace and decorate things as you can, not just a bunch of junk all at once or a bunch of fancy things that torpedo your cash or create recurring credit card debt. A new house doesn’t have to look like Pinterest or Southern Living overnight!
- Children, but No Wills: Once you get married, you should probably have a will. Once you have kids, you should definitely have a will! A will is how you name guardians for your children, and even though it is the last thing you probably want to do between sleepless nights and sippy cups, it needs to be done. Wills also help make sure your spouse is looked after and your final wishes will actually be fulfilled.
- Being Too Risky / Getting Too Defensive: So much is written, and rightfully so, about investors who get too risky and end up losing large portions of their investment portfolios. I won’t pile on further to that rant today, but I will offer that I think there should probably be a little more written about investors who get too defensive and end up spending down their assets and losing their purchasing power because their portfolios don’t generate enough growth. Portfolio growth is a function of interest, dividends, and appreciation; interest and dividends alone may not be enough to help you maintain your lifestyle.
- Waiting Too Long To Move on Your Own Terms: Very few people want to move to the smaller house, the retirement center, or the skilled nursing facility, but there’s a lot to be said for moving when you can versus moving when you have to. Although often an emotional decision and process for the mover(s) and their family, doing so at your own pace and at your own accord is often a lot smoother and more dignified than waiting for a fall or other “triggering event.”
We all make mistakes, but now there’s no reason for you to make these!