Managing finances is rarely easy. If it is, people wouldn’t have to deal with debt, bankruptcy and other related financial troubles. But it’s not rocket science either. In fact, if you stay away from these ten common money mistakes, financial planners guarantee that you’re on the right path to enjoying a health financial life.
Mistake 1: No budget plan
Not have a budget is one of the biggest and most common money mistakes people commit. Without a budget to guide your spending, it’s harder to achieve your financial goals and it’s easier to get drowned in debt.
To manage your finances more effectively, you need to make it a habit to plan your spending month after month. Before you even receive your paycheck, pay yourself first by allocating about 10 to 30% to savings retirement and paying off debt. The rest of the money you can use to meet your monthly expenses.
Mistake 2: No sufficient emergency fund
Some financial experts may tell you to pay off your debt especially the high interest ones as fast as you can but to the detriment of your savings particularly your emergency fund. While paying your debt is important, saving for the rainy is just as equally important. Without a sufficient emergency on hand, you may end up charging your medical or car repair bills on your credit card. Rather than focus on just paying debts, inject balance by setting aside a certain percentage each month for your emergency fund.
Mistake 3: Not taking advantage of your retirement fund match
There are some companies that offer a match to your retirement fund program. As long as you contribute to your fund, your company matches that contribution essentially giving you free money. To know if you can take advantage of this kind of offer, make sure to speak with your HR department and inquire.
Mistake 4: Not saving for retirement early
If you’re young and just started working, not contributing to retirement as early as you can is a common mistake. Many young people think that retirement is too far away anyway which is why it’s easier to procrastinate. Avoid committing the same financial blunder by prioritizing retirement savings no matter your age. Put enough money to your funds and add extra money to these funds if you have any.
Mistake 5: Not knowing how much you need for retirement
Other than not saving as early as you can and enough for retirement, many people actually don’t have any clue as to the amount of retirement savings they need to keep up their current lifestyle. Continuing to be this way is like running a race with no end in mind. Put an end to this mistake by taking the time to knowing how much you need for retirement because this is the only way to beat inflation in the long run.
Mistake 6: Not having an estate plan
If you have a business, a property or any asset you own with another person, you might want to have an estate plan on hand as early as now. This is especially recommended if you have kids to think about. Make sure your beneficiaries are in place for all your retirement accounts and other investments. You may also need to create a will if there are a lot of properties and funds to be dealt with.
Mistake 7: No adequate life or disability insurance
Most people have life insurance but no disability insurance. They think that the worst that can happen is if you died unexpectedly. Life insurance should take care of your family if it happens, but how about if you are disabled and unable to work? To cover all bases, make sure your policy has coverage for disability.
Mistake 8: Relying on your investment advisor too much
While professional help is good, you shouldn’t rely on it solely for your financial management. Financial advisors may help with your investments in general but they wouldn’t tell whether you are saving enough for your emergency or retirement fund. The key to finding the best financial advisor is by first knowing what you need. If you need someone to help with your retirement then you need to look for one that specializes in this aspect.