2. Forking over too much in fees
The more you pay in investment fees, the less you get to keep of your returns. So it literally pays to know what your investments cost you. When it comes to mutual funds, avoid funds that come with a sales charge, also called a load. In fact, this is another good reason to consider sticking with index funds and ETFs, which can have fees (otherwise known as “expense ratios”) as low as .03 percent. Also be aware of any trading fees and, if you're working with a financial advisor, ask what his (or her) pay structure is.
3. Getting too emotional
You can easily get sucked into the daily churn of the market, but investing based on today’s headlines can often lead to trouble. Some bad news might make you panic and run—and end up selling when prices are down—while good news could send you on an irrational shopping spree while prices are high.
Keep your emotions in check with a solid, long-term investment plan you’re willing to stick to no matter what’s going on now.
4. Jumping in without doing your homework.
Emotions can also push you to jump into investing in something without taking the time to research it.
Working with a financial pro can help you develop an investment strategy that’s a good fit. But educating yourself through books, courses and other resources (like, say, the site you’re on) can also help you gain a better understanding of what’s worth investing in—and what’s not.
5. Being overconfident
Check your swagger, too. As knowledgeable as you might be about investing, the stock market can make a fool out of anyone. Being overconfident might lead you to think you can time the market or to hold onto a stinker for too long due to pride. Again, sticking with a carefully thought-out investing plan can keep you from sabotaging yourself.
Paying Off Debt
1. Waiting until you make more
You can't guarantee your income will rise, but you can be sure that your debt will get more expensive the longer you let it sit. Even if interest rates weren’t heading up, the magic of compounding can work against you in this case, and interest will accrue exponentially on your growing balance. The sooner you commit to a repayment plan, the less you’ll pay in the long run.
2. You start before having an emergency fund
That said, you do want to set aside some cash for an emergency. The standard advice is to have at least three months’ worth of basic expenses, but you can aim for a smaller goal of $1,000 initially. That should be enough to cover typical unexpected expenses like a medical bill or minor car repair—and help you avoid racking up more debt and throwing your repayment plan off track.
It’s also smart, by the way, to start investing while you pay off debt—and again, it doesn’t have to be much. If your employer offers a retirement plan and match, you should at least take advantage of that. It’s free money! But the point is, the earlier you start investing (even if it’s a small amount), the longer your money has to grow.
3. Not making it a priority
According to CreditCards.com, the average credit card interest rate is a whopping 15.96 percent—a hefty amount that can add up quickly. Even though it can be a little painful in the short term, cutting costs and finding ways to up your income in order to pay off debt faster will create more financial security and less stress in the long run.
4. Paying off the wrong debts first
Paying off any debt is a step in the right direction, but there is an order of operations here: “You should almost always pay off credit card debt before any other type,” says credit pro John Ulzheimer, formerly of FICO and Equifax—because credit cards typically have the highest interest rates. Indeed, while credit cards hit you with rates in the teens, the average rate for a 30-year fixed mortgage is currently 3.8 percent.
5. Forgetting the deadline on balance-transfer offers
One way to clear away debt faster is to use a balance-transfer offer, which can bring the rate on some or all of your debt down to zero—for a limited time. If you’re aggressively getting rid of debt and can pay off what you transferred before the deadline (typically within one or two years), this can save you a lot in interest. But if you let that initial rate expire, the charge on the remaining balance can spike to more than 25 percent, potentially leaving you worse off.
Click the arrows below to keep reading.
June 23, 2017
June 23, 2017