10 Ways You’re Sabotaging Your Financial Future (#6 May Surprise You)


Skipping Retirement Savings

Among older Americans, one of the biggest financial regrets is not saving enough for retirement. While it can be tempting to skip your work savings plan in favor of paying off the mortgage earlier or going on vacation, it’s important to realize the costs of failing to save for your own retirement. Unlike other expenses, there is no way to take out a loan for this part of your life. Start saving by contributing the minimum required to get your match at work. If this is too much, then start with a smaller amount, then increase your contribution as you get pay raises.


Not Having a Budget

Creating a budget is the only way you can plan and achieve your financial goals. Creating a budget forces you to decide how and where you’re going to spend your money based on living expenses and see where you need to cut back.


Not Having an Emergency Fund

Less than 33% of American households are unable to cover a $1,000 emergency.  If you’re one of them, then having some cash in reserve should be a top priority. Even if it takes you a few months or years to save the money, now is the time to start saving.  An emergency fund not only gives you the ability to deal with small unexpected expenses, but it also is the basis for building wealth. Even saving an extra $5 a month can help you avoid overdraft fees (keep a small amount of money in your savings account that can cover a single bounced check), helping you to keep more of your money. After you a small amount of money, set more goals for yourself such as having enough in reserve to cover the deductible on your insurance or an entire month of bills.  While it may take you years to save the six months of emergency funds that most financial advisors tell their clients to have on hand, everything that you save means that you won’t have to rely on loans when an unexpected expense does come up.


Paying Over the Top Fees

Take a look at any fees your bank is charging you for ATM fees, monthly checking account fees, bill pay and more then shop around if you’re not satisfied! There are plenty of comparison sites to let you see what each charges (and offers) side by side and be sure to include credit unions in your consideration.


Not Caring About Your Credit Score

Certainly everyone knows that there is no way to get a good interest rate on a loan or credit card without a good credit score, but not many people realize that this number is used to determine other things as well. Even if you don’t need a loan in the near future, your credit score is reviewed by employers, insurance agencies, and even law enforcement. For this reason, it’s a good idea to make sure that you’re paying your bills on time and that you have at least one open credit account that is in good standing.


Not Having Adequate Insurance Policies

While some people do elect to enroll in life insurance, they completely forgo an important alternative, disability insurance (which they are more likely to need.) If your current coverage is inadequate, do research to shop around for supplemental plans.


Not Being Strategic About Paying For College

Plenty of parents want their children to get started in a career without the burden of debt.  Unfortunately, too many of them are willing to risk their own financial security to do so. Skipping your retirement savings, taking out a home equity loan, or borrowing money that you cannot afford to pay back will make it a lot harder for you to retire on time. Instead of paying for a school that you can’t afford, look into cheaper options and consider what would be a reasonable amount of debt for your child to pay back after graduation. Many advisors recommend taking out the equivalent of his or her expected first year of salary.


Keeping Financial Secrets

Hidden debts and bills are one of the worst things that you can keep secret from your partner. If your finances are linked to another person, then you have to be honest about how much income, debt, and assets you actually have. If you have good reasons for keeping these things a secret, then you must take steps to untangle your finances. As long as you share a checking account or a mortgage with another person, you both have to know that the other person is capable of making on-time payments and not overdrawing the account.


Thinking an Investment Advisor Is Enough

If you’re getting advice regarding your investments, that may not include the big picture of your financial health (including if your emergency savings account is even healthy enough for you to investing as much as you think you can.)


Becoming House-Poor

Housing is one of the most common areas that people tend to overspend on. Often, this is done out of the mistaken belief that a primary residence is an investment, not a purchase.  The truth is that a high mortgage payment can wreck your ability to save for future emergencies and deal with other issues such as an illness or job loss that can make it hard to meet the obligations of high mortgage payments. Look for a home that can be improved as your finical situation becomes more stable. Keep your mortgage costs low by refinancing if you’ve already purchased a home.