When it comes to financial matters, unless you are a professional or a wiz with money, it can be difficult to know which choices are the right ones to secure your family’s finances for the future. Let’s face it, even the most educated and savvy money gurus make mistakes and some crisis in life are impossible to avoid. Knowing which financial mistakes to avoid can help you secure your savings and retirement, and we will discuss some of them in today’s article.
One of the biggest financial mistakes we see people making, regardless of their age, is not saving for retirement. This is a huge no-no that can seriously impact you later in life. While it may be difficult to set aside a little cash every paycheck, keep in mind that you will not always have the earning potential that you have now. Once retirement kicks in, odds are you will not be earning a steady paycheck and will need to rely – or at least supplement – your earnings with your retirement fund.
Another financial mistake people make is avoiding paying off debt, and, instead, paying the minimal payment. With this approach, you will find yourself in deb forever and waste plenty of money that you could be saving (see the paragraph above). In order to pay off debt, you must deveop a plan with that goal in mind. With credit cards, we suggest taking the card with the highest balance and rate, and paying it off first. Any extra money you can add to your monthly payment for that bill, do so. Once it is paid off, take the money you were devoting to it and roll it down to the next highest card. Rinse and repeat. Before you know it, you will be debt free.
Probably the biggest mistake you can make from a financial standpoint is not having a budget in place. Figure out your monthly income, your monthly overhead costs (bills, groceries, gas money, mortgage, etc) and see where all of your cash is going. If you have a surplus, great – add some to your savings account. If there is no extra money, it is time to start cutting some things out. Maybe avoid buying lunch everyday and consider brown-bagging it instead. Even if you do have extra money at the end of each month, you may want to think about cutting back a little and using the savings to pad your retirement fund.
Finally, many people make the mistake of not planning for emergency situations. With a moments notice, disaster can strike, and you and your family can find yourself in a very difficult financial situation. From natural disasters such as hurricanes and tornadoes, to personal injury and tragedies – you never know what tomorrow may bring. To help combat these types of situations, always make sure you have an emergency or contingency fund available. Setting aside enough money to cover your expenses for three months is a great place to start. If you can do six months, even better.
Additionally, having long-term disability and life insurance for you and your spouse (especially if children are involved), is pivotal to surviving any disaster that may strike.
Want to learn more ways to secure your financial future? Contact the professional certified public accountants at Clayton, Paulk, & Associates today and let us help you get on the right financial path.