Unless you majored in finance, you are probably just guessing your way through the financial world like everyone else. Along that journey, you have and probably will make some rather large financial mistakes. This article will detail some of the biggest ways that you could be jeopardizing your financial future with some often very simple mistakes.
Not Contributing To Your 401K
You should contribute at least the amount that your employer matches. Not doing that is basically giving money away. This is money that your employer is providing in compensation and money that many people leave on the table. You can never get it back, so take advantage of it now.
It might not seem like a big think to invest in retirement when you are young, but the more you save now, the more you will have in retirement in the future. Money you invest in your twenties will continue to earn you additional money and will grow for 30 to 40 years. Saving regularly from a young age can help you retire early and enjoy the last years of your life more thoroughly.
Not Maintaining Your Credit Score
You need to pull your credit at least once a year. Even better, sign up for a free service like Credit Karma. Incorrect information gets added to credit reports all the time and when it is found, it can take months to get it removed. This means that you need to stay proactive and regularly check your report. You do not want to just check it every time you make a purchase.
A bad credit score can affect you in a number of different ways that you do not even know about. When you are applying for a job, your employer might run your credit. When you get insurance, they will often run your credit. More and more companies will pull your report to not only see if they want to do business with you but to see what they will charge you for services. Not keeping your score in check can cost you thousands of dollars in extra charges and higher interest rates.
Not Having A Goal
You can’t just wander through life without knowing where you want to end up. Set a goal as soon as you can and take steps to reach it. Having a finish line in sight is the best motivation, so decide what you want out of this life and go get it.
Do you want to retire at 50? Do you want to be able to buy an RV and travel around the country? Determine what you want and then you can figure out what kind of money it is going to take to get there.
Not Pushing Yourself Professionally
It is easy to get into a rut but this is not the way to get ahead. It used to be that people stayed with companies for their entire career. They could count on a little stability and often a nice pension at the end of it. Those days are gone and people can not really expect to spend their entire career with one company unless they own it. In addition, don’t expect to get huge increases of salary with one company. Those days are also gone.
If you want to get a big increase in pay, the only way to do so is to change companies. Unemployment is low and companies are paying higher and higher salaries to acquire new employees. If you are satisfied with an annual 3 to 4 percent raise, stay where you are. If you want a 10 to 20 percent raise, get your resume in order.
Not Using Credit Responsibly
It is all too easy to get overextended on your credit cards. With banks and finance companies literally throwing money at you it becomes easy to get what you want without paying for it, at least not right away. Before you know it, you can be paying $400, $600 or even $1000 a month on just the minimum payments on cards that will take you 20 years to pay off. This is money that could be going into a retirement account to let you get out of the workforce before you turn 70.
In addition to robbing you of savings money, being overextended can hurt your credit score. Too many open accounts with balances that are too high can drastically lower your score. This can cost you money with higher interest rates on loans and bills like auto insurance or even utilities.
Not Getting Proper Medical Insurance
You have insurance for your car so that if an accident were to happen, you will be covered. After all, can you afford a $30,000 hit if your car were totaled without insurance? Well, what about your body? If you suddenly came down very ill, $30,000 could seem very trivial. You could wind up with debts of hundreds of thousands of dollars. Sound impossible? It is not and it happens to people all the time, causing them to spend years trying to pay off the debt or to just have to file bankruptcy.
Do not let this happen to you. Instead, get yourself some proper health insurance. At least enough to pay in the event of a major illness.
Not Having A Budget
If you are just blindly paying bills each month, you might be making a mistake. You need to organize your bills into a budget so that you know where your money is going. This is the only way that you can streamline your expenses so that you know what you are spending your money on and where you can make cuts to save more.
To make a simple budget, just open a spreadsheet program and list out all of your monthly fixed expenses. Then add a fixed amount per week for food, gas, entertainment, etc. Once you have everything laid out, you can plan how much you should save each month for the future. If you find you can not put up anything for savings, you can make appropriate cuts.
Not Using Your Money Responsibly
A mature person does not waste money on just anything. Sure, from time to time you should treat yourself but you should not buy everything that you want. If you are about to get paid again and you have money leftover from your last check, you should save it. If you find that you always have a surplus, you should be automatically be putting more money into a long term savings account. Resist the urge to just go on a shopping spree. If you do that, there will come a day when you regret it.
Not Purchasing A Home
Are you renting because you are not ready for the responsibility of home ownership? This is costing you in several ways.
For starters, you are not gaining equity in a home. Your money is just going down the drain and making your landlord or some management company rich. If you buy a home, a portion of your monthly mortgage will go towards your loan, building you equity. In addition, your home is also building equity as it appreciates.
Another way you are losing money is through escalating rent. When you buy a home, the mortgage payment remains relatively stable year after year. It might go up a bit as property taxes increase but overall, it stays the same. You can not say the same for your rent payment however. It probably goes up every lease term and by a lot. Buy a home and in just a few years, you will probably paying less for housing that you would if you rented.
Not Living Within Your Means
This is the biggest mistake made by most young people. They see others spending and feel the need to do so a well. They either feel the need to compete and keep up with those people or they are just envious of the lifestyle that they see that others seemingly have.
What most people in that situation do not get is that everyone’s financial means can never be the same and you must live within yours. Those people that you see spending and spending might make considerably more than you. It is also just as likely that they make the same or less than you but are acquiring tons of crippling debt.
Instead of going into debt to keep up with the Jones’, make a budget and stick to it. Buy yourself some luxury items from time to time if you can afford it but son’t go crazy. Before you know it, you will be the one that is being looked up to by those who overindulged in the past. It is nice to live like a king but it is nicer to have stability and security.