Most, if not all, of us are constantly looking for different ways to save and grow our wealth, but are we making careless mistakes along the way without even realizing how it negatively affects our finances?
1. Having too much money in your personal accounts
That statement sounds odd. Doesn’t it? Actually, having too much cash available in a checking or savings account can do more harm than good. By limiting the disposable income amounts available in your low, interest-bearing accounts, to what you actually need to cover all of your expenses and some more, you can allocate more cash to higher earning investment options. Yes, it may take some extra work to determine what you truly need, rather than taking as you go, but it’s a small mistake, that could add up over time.
2. Not having a plan to save for retirement
Retirement planning is essential for everyone, even if you have a diverse investment portfolio. Not planning ahead for retirement can be detrimental to your financial goals. Nowadays, people are retiring at a later age than they once used to, but just because you plan to work a
little longer, or you think you’ll have enough to live comfortably when that time comes around, doesn’t mean you will. Having a plan that takes inflation, cost of living, economic factors and unexpected life occurrences into consideration, can help you reach your desired retirement goals.
3. Having several 401(k) accounts
Investing in a 401(k), is a great step to take financially, however, often times people can accumulate quite a few of these accounts throughout their careers with different employers. Several problems may arise if you don’t keep track of them. You may forget to update your information with former employers, incur unnecessary fees, or simply just forget about one you opened many years ago. To save yourself the hassle and extra work, consolidate your multiple 401(k)s into one IRA account or roll them into your current 401(k).
4. Not having a will for your children (especially if they’re minors)
No one likes to discuss what will happen when they’re gone, but the reality is, death happens to each one of us. Not having a will in place for your children of a minor age, will allow the state to decide what your children will receive in the event of your death. Although this isn’t the
favorite topic of many, organizing your will as soon as possible, will bring peace of mind not only to you, but to your loved ones.
5. Cars affect your finances, negatively
Let’s face it. The truth is many of us feel a great sense of satisfaction when we drive stunning cars. It’s hard not to desire the latest luxury model of our choice, when car manufactures are spending billions to persuade us with advertising campaigns. Although, it may feel like sweet
success, cars, are one of the highest depreciating commodities today. Not to mention, many of us never see the end of payments. Even if you buy, resisting the urge to sell and upgrade is not an easy task. Many of us fall into this cycle of continuously leasing or purchasing new cars and forget how it negatively affects our financial goals.
6. Allowing someone else to manage the finances
Not every household has two partners who are equally great at managing finances. One person usually takes the lead and manages the finances, while the other trusts in his/her judgement to take care of this mandatory task. Although this may seem like a great idea, not doing the finances together can pose a large risk to the financial security of you and your family. In the unfortunate events of illness, divorce or death, knowing how to manage the finances can keep your world from financially falling apart.
7. Increased spending as your income increases
For some of us, our sources of income never feel sufficient for our needs, goals and desires. We make more money and spend more money. Rarely, do we make more and spend less. Yes, financial freedom and security require money, but not necessarily an increase in income. By
creating a budget, you can see what you truly can and cannot live without. Sometimes, all it takes is compromising a few things to help you reach the financial goals you planned for.