We all know how stressful it can be to manage money, but ignoring financial matters, or not thinking them through sufficiently, can wreak havoc on your life down the road. Here are some “no-no’s” to avoid:
Buying too much house. Too many times people find themselves “house rich and cash poor,” mainly because they fell in love and bought a house that they could barely afford. That’s why it’s important to come up with a realistic housing budget in advance and stick to it. It’s great to own a house that has everything you always wanted, but do you really want to be saddled with the overwhelming debt that comes with it?
Not refinancing your mortgage when interest rates decrease. When you see rates drop a percentage point or more, it’s probably a good time to look over your current mortgage. If you plan on staying in your home for the foreseeable future, it might be a good idea to consider refinancing, since it could save you thousands of dollars over the course of your loan. A home mortgage specialist can help you to decide if refinancing makes sense for you.
Blindly investing. We’ve all heard the success stories of people who have made a fortune investing in the stock market. But there are just as many stories of people who have lost everything due to poor investment choices. If you lack a solid financial background, “do-it-yourself” investing could be a very risky, and very expensive, mistake. Meeting with a financial advisor or an investment executive could save you a great deal of time and money in the long run, and ensure that you’re comfortable with the level of risk associated with your investment portfolio.
Not saving for retirement early enough. When is the right time to start saving for retirement? The sooner, the better, even if it’s only $25 or $50 per paycheck. Even a small amount each week can end up making some serious money for you over the course of 20 to 30 years in terms of compound interest. If you have the funds automatically transferred from your paycheck to your retirement account, chances are you won’t even miss it! Once you get into the savings habit, you’re likely to stick with it. And don’t forget to up the amount you save as you start making more money over the course of your career.
Paying too much for a new car. The lure of the “perfect car” often traps people into paying much more than they can afford. While this may not be as financially debilitating as the “house rich/cash poor” scenario, it could still have a serious impact on your wallet. This is another situation where you need to create a realistic budget and stick to it. And don’t try to justify the higher sticker price with an offsetting “zero percent” or low-percent interest offer. If the total cost doesn’t match what you have budgeted, look elsewhere for a better deal. Or lower your expectations to a level you can afford.
Failing to use a budget. Many of us like to think we’re great money managers and we don’t need a blueprint on how to make and spend money. But if you find yourself living paycheck to paycheck, then it’s obvious something’s not right. Fortunately there are a lot of free budget tools online (or pre-installed on your computer or mobile device) that you can use to set up a budget to keep you financially sound. Even if it seems like your finances are in great shape without a budget, putting one together (and sticking to it) can help you save even more money each month.