| 4 COMMON FINANCIAL MISTAKES AND HOW TO AVOID THEM |
| Managing finances is something we have to do our entire lives. In order to get the most out of the money we earn, we need to develop some healthy habits around managing finances now and planning for financial situations in the future. But to do that, here are some common financial planning mistakes to avoid. While these may be familiar to some of us, please pass on to anyone you know who could benefit from these tips. |
| Spending instead of saving. The most common financial mistake people make is spending all the money they make. This usually stems from spending on “wants” instead of “needs.” It’s important to put money aside for future car or mortgage down payments, large purchases, and emergencies. Experts suggest saving three to nine months of expenses to get you through an unexpected emergencies like medical expenses or a job loss. |
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| Not putting away money for retirement. Social security payments probably won’t be enough to live on when you retire or decide to keep working past your peak earning years. If your employer has a pension plan, contribute to it if allowed. If there’s a 401(k) match program, set aside the maximum amount from each paycheck that your employer will match. Finally, you can look into setting up an IRA (individual retirement account). These plans can also have tax benefits, so always consult with a tax professional before making any financial decision with tax implications. |
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| Thinking all debt is the same. Many people deal with a variety of debt—unpaid credit card balances; student loans; auto, boat, and RV loans; mortgages and home equity loans; etc. But they might not prioritize paying off the ones with higher interest rates, such as their credit card balances. Yes, you need to keep up with the minimum payments on all your loans, so you aren’t charged late fees along with the interest. But focusing on paying off the debt with the highest interest rates first will help you pay a lot less on interest in the long run. |
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| Not watching your credit score. A good credit score (aka FICO Score) will help you rent an apartment, carry larger balances on credit cards, qualify for lower loan rates, and more. So, avoid hurting your credit score by missing loan payments or failing to pay credit card minimums. And keep an eye on your score. You can get a free credit report from each of the three credit bureaus once a year at AnnualCreditReport.com. This is the only source for free credit reports and it’s authorized by federal law. Ask for your free annual report from one credit bureau at a time, so you get a fresh report every four months. Check that the information is up-to-date and correct any errors. Here are tips from FICO on improving your credit score. |
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