Financial planning can feel intimidating. Even if you have a solid understanding of the basics, there are many ways to make mistakes that could cost you in the long run. Here are the top 5 financial mistakes to avoid:
Not planning for retirement
You might be surprised to learn that the average American retires with only $14,000 in savings, according to a 2018 report by Bankrate.
That number is even lower for people who don’t have any retirement savings at all. In fact, nearly half of Americans have no money set aside for their golden years–and many don’t think they’ll ever be able to retire (even though they want to).
It’s not just about having enough money; it’s about making sure you’re saving enough at the right time so that your nest egg lasts as long as possible. And if you’re not getting started soon enough, there’s no way around it: You’ll need more than what those numbers show!
Not having a cash emergency fund
Not having a cash emergency fund is one of the biggest financial mistakes people make. It’s also one of the easiest to fix, but it takes some time and planning to get there.
In general, it’s recommended that you have three months’ worth of living expenses saved up in case something unexpected happens — like if your car breaks down or your furnace stops working in the middle of winter (which happened to me!). If that seems like too much money for you right now, try saving just enough so that if something were to happen tomorrow morning, you would still have enough funds available until your next paycheck comes around. The important thing is not how much money is required for this goal but rather having some sort of cushion built up so that when something goes wrong with your finances — which will inevitably happen at some point — there are no major consequences because all costs were covered beforehand!
Not paying down debt
You can’t get ahead if you’re buried in debt. It’s as simple as that. If you don’t owe money, then your income goes straight into savings and investments — not toward paying interest on loans or credit cards.
Debt is expensive because it costs money to borrow money. When you take out a loan, the bank charges interest on the amount borrowed; that’s how they make their profit from lending to people like us! The higher the interest rate (or “APR”), the more expensive that loan becomes over time: Your payments go up with each passing year until eventually they’re bigger than what was originally borrowed in the first place (in other words: Negative amortization). And here’s where things get tricky: If someone has taken out several high-interest loans or lines of credit at once — say through multiple credit cards — then all those small payments add up quickly into one big bill at month-end when all those bills arrive at once! This makes budgeting difficult because there will always be something else coming due sooner rather than later; this could lead some individuals down an unhealthy path towards financial ruin if left unchecked long enough…
Not protecting your family and estate with life insurance.
Life insurance is one of the most important financial tools you can have in your toolkit. It can help protect your family and estate, especially if you have a high net worth or have children.
Life insurance can pay for funeral costs, college tuition and more. In fact, life insurance has many uses beyond simply providing for your loved ones after death:
- It can provide cash to pay off debt (including mortgages), medical expenses and long-term care costs when needed most–when someone is sick or injured; when they’ve lost their earning power due to disability; when they die prematurely.*
Not understanding the costs of financial products and services.
You may be paying too much for financial products and services. In addition to the fees, commissions and expenses that are unavoidable when you buy a product or service, there are also taxes that can add up quickly.
You should always ask about the total cost of any financial product before you buy it. And remember: if you don’t understand what the costs are or how much they will add up over time, ask someone who does!
With some planning and forethought, you can avoid these common mistakes.
When it comes to managing your finances, you can’t afford to make mistakes. With some planning and forethought, you can avoid these common mistakes, don’t be afraid to ask for help.
Insureous Financial Professionals can walk you through a financial needs analysis to obtain a clear understanding of your current financial picture and where you want to be when you would like to retire. You will wind up with tips to improve your financial situation. You will also gain a strategy to take control of your money now, so you reach your future goals and dreams. And there’s absolutely no cost for this service.
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