Nobody’s perfect. But making mistakes when it comes to building credit, paying off debt, investing or saving your money can cost you big time.
Fortunately, you don’t need to commit them yourself in order to learn the lessons. We’ve laid out 20 common money mistakes below, plus how you can avoid (or fix) them.
1. Waiting to get started
It can be tempting to put off saving, especially when you’re young and/or not earning much and figure you’ll catch up when you’re making more. “But you’re never going to get this time back,” points out Natalie Colley, analyst at Francis Financial. And time is your biggest ally if you want to build wealth.
Even if you’re only able to save a few dollars, the most important thing is to get into the habit of saving and investing so you maximize the time your balance has to grow and you can really benefit from compounding interest and earnings.
2. Saving saving for last
Does this pattern sound familiar? Get paid, spend money, wonder why you have nothing left to save, repeat. So how can you break the cycle?
“You have to pay yourself first,” says Nicole Mayer, partner at RPG Life Transition Specialists. “It’s simple. Save [and pay bills] first—then you can spend the rest of your money on whatever you want.”
3. Not paying attention to interest
Yes, we’ve been living in a low-rate world for years—though that’s starting to change—but you can do better than earning nothing on your savings. “An easy fix [to keeping too much money in a low-interest account] is to link your checking account to an Internet savings account, and transfer money you don’t need for immediate expenses,” says consumer banking expert Ken Tumin of DepositAccounts.com. (Compare savings accounts on sites like Bankrate, NerdWallet or DepositAccounts.com)
4. Doing it manually
Again, without a good system in place, it’s easy to fall into the trap of overspending and not saving anything. A better strategy is to set up automatic transfers from your paycheck or checking account to savings and investment accounts, so you never see that money at all. (Bonus: You can also set up automatic bill pay to ensure you’re never late.)
5. Falling asleep at the wheel
Even though you’ve engaged autopilot, you still want to log into your bank and credit card accounts regularly to monitor activity—and be sure there are no fraudulent charges or unexpected fees, says Tumin. “If you wait too long to dispute them, you may not be able to get your money back.”
1. Putting all your eggs in too few baskets
Having a well-diversified portfolio is crucial to investing success, but rookie investors often misunderstand what diversification really means. You want to own stocks, bonds and cash—then diversify further from there, making sure you have U.S. and foreign, large-, mid- and small-cap stocks, and government and investment-grade corporate bonds with varying maturity dates.
Sound complicated? Investing in index funds and exchange-traded funds (ETFs), which are diverse and relatively low cost, can help simplify the process. (This is what Acorns, and some other investing apps, do.)
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June 23, 2017
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June 23, 2017
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