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Identifying financial mistakes is key to preventing them

Published: July 9, 2021

Category: Educational

No one is perfect. If we were, we wouldn’t be needing to address regrets and mistakes. You’ve made many mistakes in your life, and there are going to be multiple times when you’ll make more. The only thing you can do is learn from them. But sometimes, the mistakes we make have to do with our money and finances. These can be small accidents we can bounce back from, like paying your internet bill a week late, but others can be larger ones that can really hurt you later on.

 

This article is designed to tell you about the nine financial mistakes that you may possibly regret later, and why you will want to avoid making them. Let’s get right into it.

 

Not saving your money

This one is obvious. It always seems enticing to spend your leftover cash flow for other things,

like nights out or new items, after you take care of your necessary payments, like your bills. It seems harmless at the moment, but this will leave you little money for your future.

 

This is especially true when you think about your retirement. When you retire, there are payments you are still expected to pay. This can be insurance premiums, mortgage payments (unless you sign up for a reverse mortgage), final expenses and more. Although you will be receiving other incomes, like your 401(k) and Social Security, these may not be enough. Undoubtedly, you will need to have a separate savings fund to tap into when you retire. This will help cushion any unexpected expenses or bills.

 

Save your money and prepare for retirement while you are doing it. There are budgeting apps available, but The Best Senior Services is also here to help connect you with an agent who will get you navigate budgeting.

 

Buying what you know you don’t need

This could be multiple things, ranging from small knick-knacks to designer clothes to cars. Believe it or not, people buy things just because they can, not because they need to.

 

If there is a purchase that you are facing and you cannot picture yourself using it often and consistently, it may be better that you don’t get it. Now, this isn’t to say that you should never buy yourself something fun every once in a while. But if you are constantly purchasing things you don’t need, you will be hindering yourself in the long run.

 

Not investing as soon as you can

You will want to start investing as soon as you possibly can, and this is why: when you invest money now, it grows later. So, let’s say you invest $200 a month over a ten-year period. You would think that you would only have $2,400 saved, but in reality, because of accumulating interest, the amount will be higher. This is all because of a great strategy known as compound interest, which is the additional interest to an initial amount of a deposit.

 

A lot of people are scared of investing because they don’t want to lose their money. If you’re thinking to yourself, I’m not rich enough to invest, you’re wrong. You don’t have to be rolling in money to be able to begin. Anybody can get started by simply downloading apps, visiting with a broker, or investing through your employer.

 

Deferring loans

When you’re younger, one of the first loans that you will likely be responsible for is student loans from college. When you graduated from undergrad, and you might have had the option of moving onto graduate school. Doing this allowed you to defer your loans or paying them at a later date.  That might have been something you passed on, or it was something you felt like you needed to do at the time.

 

You’re not in your college years anymore, but deferring loans is something you are very familiar with now that you have been acquainted with it. That’s because you don’t just have to defer your student loans. There are others out there that you can put off, too, like personal loans.

 

This is something you will want to avoid doing. Interest is almost always added onto your loans and will likely accumulate even while they are deferred. Although there are interest-free options, that doesn’t guarantee that you will have interest-free deferments.

 

Work out a payment plan with a financial specialist to figure out how you can begin paying off any loans you have at the moment so that you don’t have to pay more at a later date.

 

Relying on your credit card

Sure, credit cards are great. At least, until it’s the end of the month, and you realize you might have made a few too many purchases with it. Credit cards are great in the sense that they allow you to build upon your credit. Using your credit card will also earn you points and bonuses that you can use at a later time. If you use it wisely, then you will help yourself out of debt and promote financial well-being from the bonuses you will receive. However, credit card debt is easy to fall into, yet incredibly hard to pull yourself out of.

 

Try limiting the use of your credit card and use it for small purchases. Using it for smaller purchases will lead to smaller bills that are easier to pay off. After a certain amount of time, you’ll start to get the hang of things and depend less on the card.

 

Buying the newest version of everything

It can be really hard to stay away from new things sometimes. Let’s take Apple for example. Every year, Apple updates its iPhones. Apple also regularly updates its laptops, desktops, iPads, watches and more. A lot of the time, the company’s newest features are extremely desirable, and as a result, many people upgrade their old phones to get it.

 

The bottom line is, many people forget how their technology, clothing, appliances, and more are built to last for as long as they can. Buying the newest version of things will hurt you in the long run because you will find yourself in what seems like a never-ending cycle of funding wants over needs.

 

Living above your means

When you were younger, it’s likely that you didn’t start out making as much as you do now. As a result, you probably lived below your means, meaning you didn’t go out and buy unnecessary things. Once people get older, and generate a better income, they tend to start living above their means. This means that they begin to purchase things that they can go without.

 

Living above your means is one of the worst financial mistakes you can make because you’re not leaving yourself any extra income. In the long run, you are hurting yourself by living this way.

 

If you have a sudden family emergency, or you have a pet that needs to go through surgery, you won’t have the money to support the situation. Begin living below your means so that you can be prepared for whatever emergency happens, and so that you can gain control over your bills and other payments you need to make.

 

Taking from your 401(k) early

Just because you have the option to pull from your 401(k) before your retirement, it doesn’t mean that you should. If you do this, you get penalized by the IRS. In fact, it will hold 10% of your withdrawal as taxes if you are under the age of 59 ½. Not to mention, if you pull the money out now, then you won’t have that money saved for your retirement.

 

If you still feel like you should pull from your 401(k), make sure that you re only doing this as a last resort. You do not want to do this if you have any other means of acquiring your needed money. One possible method is taking out a loan against your 401(k). Doing this means that you will replace the funds at some point.

 

Listening to get-rich-quick schemes

This last mistake we are mentioning is a big one that you will definitely regret later in life. If life were easy, we’d all have pockets overflowing with cash. There is no true way of “getting rich quick,” and if there is, it may not be completely legal. In fact, these get-rich-quick schemes are likely to be scams. Most of the time, the people who are trying to “get you rich” are actually taking your money.

 

Some of the get-rich-quick schemes that you’ll want to say far away from include:

  • Internet business opportunities that require a down payment to be a partner. It’s likely that if a business idea is proposed to you online, it’s a get-rich-quick scam. You probably don’t know this person, and he or she is now asking for your money to be a part of the business. This is something you will want to avoid, or at least heavily investigate, because it’s likely that you won’t receive a penny back.
  • Investing in a company that withholds vital information from you. This is a major red flag. If there is an opportunity for you to invest in a company, but the company is refusing to tell you information like price-to-earnings ratio, debt-to-equity ratio, dividends, etc., then you need to immediately decline the offer. Your investment will go nowhere.
  • Lottery tickets. There is nothing wrong with occasionally playing your hand to see if you’ll hit it big. However, if you are relying on the luck of winning the lottery, then you need to quit while you’re ahead. In fact, your likelihood of hitting the jackpot is about 1 in 13.9 million.
  • House flipping. Unless you are a professional, this is something you want to avoid doing. Many homes require more repairs than you might expect, and as a result, you’re faced working on a house that should have been demolished. This is an unfortunate circumstance to find yourself in, especially when you think about the money you have drained into this. Avoid house flipping DIYs so that you can save yourself the money in the long run.

 

Making financial mistakes happen. It only goes to show that we are human. However, identifying financial mistakes that are common is key to preventing them from happening to you. If you still need more guidance in making the best financial decisions for your future, we are here for you at The Best Senior Services. We educate you and other seniors and connect them with a local licensed agent because helping you is what we do best. Contact us today by calling 855.979.8277 or visit our website.