Top 10 Money Mistakes You Might Be Making
Top 10 Money Mistakes You Might Be Making
1.) Paying Medical Bills with Your Credit Card. Why it’s a mistake: Medicals bills have zero percent interest and providers are typically willing to accept partial payments over time. Once you pay that doctor’s visit or hospital bill with a credit card, you’ll be hit with interest fees unless you pay your charges in full by the end of the month.
2.) Borrowing from Your 401(k). Why it’s a mistake: By treating your 401(k) like an ATM, you’re essentially robbing your future self of a comfortable retirement when you do this. Although you’ll be paying yourself a small amount of interest, the amount that you borrow is unplugged from your investments and you’re missing out on that growth. If you leave your job – whether you quit, get fired, or laid off – you will owe the balance of your 401k loan within 60 days or face penalties and taxes. The last you need when you lose your job is a big tax bill!
3.) Letting Uncle Sam Babysit Your Savings. Why it’s a mistake: If you have debt of any kind – credit cards, student loans, or a mortgage – you’re better off paying down those interest charging accounts, rather than letting the government hang onto this money interest-free. Plus, if you have a financial emergency, you cannot access the money you’ve overpaid the government until Tax Time. Set up automatic transfers of that money from your paycheck right into your savings account. (Consult your tax professional to ensure that you’re adjusting your withholdings properly so your refund is as small as possible without owing the IRS!)
4.) Cosigning Someone Else’s Loan. Why it’s a mistake: There’s upwards of a 75% chance that you’ll get to pay the loan yourself. When you cosign a loan, you are willingly taking on the legal and financial burden of that debt. Banks are experts at lending money and they have come to the conclusion that your friend or family member is unlikely to pay them back.
5.) Speaking Negatively About Money and Wealth. Why it’s a mistake: “The Law of Attraction” states that we attract the things that we focus our thoughts and words on. If we continue to think and talk about what we lack, we are attracting more of that to ourselves. Victim thinking and financial prosperity are 100% incompatible and mutually exclusive. If you want to increase your wealth, you need to upgrade your money vocabulary and start speaking positively about your financial future.
6.) Failing to Make Savings a Priority. Why it’s a mistake: Many people don’t even have a modest amount saved to cover unexpected expenses. According to a survey done by GoBankingRates in 2015, 62% of Americans have less than $1,000 in savings. This is a problem because we end up using credit card debt as a safety net. Set up automatic transfers from your paycheck to your savings account every pay period to automate your savings discipline.
7.) Avoiding Money Discussions with Your Significant Other. Why it’s a mistake: Talking money with your honey can be stressful. Most people are more embarrassed about getting financially naked with their partner than physically naked! However, when couples do discuss money on a regular basis, they have a tendency to have stronger relationships. Focusing on shared financial goals will help get the two of you on the same page regarding money management.
8.) Making Only Minimum Payments on Credit Card Debt. Why it’s a mistake: If you’re only making the minimum due on your debt, you’re locking yourself into a lifetime of payments. My coaching client brought me her credit card statement that showed if she paid the minimum on her $8,000 bill (with 19.495 interest) it would take 70 years to pay it in full! But if she paid double the minimum? It would be gone in 3 short years. (Don’t believe me? Click here to see her statement!) Always pay extra!
9.) Not Knowing Your Important Numbers. Why it’s a mistake: And no, I don’t mean your credit score! Many of my clients come to me not knowing how much total debt they owe, what the payoff is on their car loan, the balance in their retirement accounts, or how much equity is in their home. Your net worth is the best measure of how financially healthy you are, and all of your assets (what you own) and debts (what you owe) factor into that key number. Net Worth = Assets – Debts
10.) Not Asking for Help with Your Money Issues. Why it’s a mistake: Ignoring the problem is not the solution when it comes to your money. We’re ashamed of our mistakes and too embarrassed to ask for help. Almost everyone who comes to me for financial coaching has some level of guilt and embarrassment over their money messes. I understand, because I’ve been there myself! The only shame would be prolonging your money anxiety, so don’t be afraid to seek the guidance of a financially savvy friend, family member, or coach.
How many of the top 10 money mistakes have you made? I’ve made 70% of them before I hit financial rock bottom! Is there one on the list you disagree with? Why? I’d love to hear from you!
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