By: Justin B. Dean, CFP®
Published: December 20, 2017
Everyone makes mistakes. Learning from them is what really matters. Consider these common money mistakes and tips to move past them:
- “I live within my means. If I have anything left over after paying my bills, I put it in my savings account.” If you fail to plan, you plan to fail. Develop a well-defined strategy to ensure you are making intentional decisions with your money. Having a plan to follow can help increase your chances of sticking to it.
- “I’ve been meaning to contribute to my TSP but haven’t gotten around to it.” Given today’s long life expectancies, you could spend just as long in retirement as you did in your working years. The amount of time and effort it takes to enroll in your TSP is a small investment that can be well worth it.
- “I’ve got plenty of time until retirement. I don’t need to plan for it now.” Retirement shouldn’t be a fantasy dream. It should be a real event you plan for in your future. In fact, the longer you put off beginning to save for retirement, the less you may have at retirement.
- “My fiancé and I don’t like to talk about finances.” Engaged couples often spend months planning weddings down to the tiniest detail, yet avoid discussing money at all. Understanding each other’s financial priorities and goals, and developing strategies in which you both agree, is essential to a successful relationship.
- “The only way to make money is to buy and sell stocks frequently.” Constantly looking for today’s hottest investments or best deal can actually undermine your success. In addition, history has shown that decisions about when to buy and sell can significantly impact your results.
- “I don’t need growth investments now that I’m retired.” While you likely want to rebalance to less risky investments when you are retired, forgoing growth investments altogether can expose you to inflation (purchase power) risk. The key is finding the right balance of stocks (growth) and bonds (income) to help meet your income needs and help you keep up with inflation.
- “Estate plans are only for people who have a lot of money.” Actually, estate strategies are for everyone, and can be as simple as having a will. Without an estate strategy, you have a default “strategy” in place – the laws of your state — that may not align with your desires.
- “I have a credit card — I don’t need an emergency fund.” If you do not have three to six months’ worth of living expenses saved in an easily accessible account, now is the time to start working toward that goal. Credit cards are not a good fallback plan — not being able to pay them off could cost you high interest and damage your credit score. Also, what if your credit limit isn’t high enough to cover the emergency?
- “My debt will never go away, so why pay more than the minimum”. You may not think you will ever be able to get out of debt, but you can! Only paying the minimum on credit card or student loan debt, however, may not get you there in a timely manner. Chances are you can find more money in your budget to put toward payments while you reduce spending. Even those daily $5 lattes or $10 lunches can add up!
- “I don’t have enough money to invest.” Investing is not just for the wealthy; it’s for anyone who wants to work toward a better financial future. If you contribute to your TSP, you’re already investing. But you can invest more outside the TSP, and you don’t need a lot of money to start.
Mr. Dean is a Financial Advisor, an accredited Asset Management Specialist, and seminar presenter for NITP.