7
Foolish Mistakes That Could Cost Your Financial Future
As the old saying goes, "A fool and his money are soon
parted." Stop acting foolishly with your finances and let
go of old misconceptions. Ginita Wall, advisor to the GE Center
for Financial Learning (www.financiallearning.com), has compiled
a list of some of the foolish ideas that can be dispelled through
financial education.
1. I don't need to pay attention to my 401(k) as long as
I contribute something, since someone else is managing it.
As the debacles at several high-profile companies show, you
can't leave your 401(k) on automatic pilot. You need to look
at your own financial and life goals and risk tolerance and
develop a savings plan that will help you meet those goals
without keeping you up at night. Based on your individual
strategy, your contributions should be spread among large
cap stock funds, small cap funds, international stock funds
and bonds, and you should evaluate those proportions annually.
2. My spouse or kids will provide for my long-term care needs.
Depending on a spouse for long-term needs is very dangerous,
particularly for women. That fact is, according to recent
research conducted by the GE Center for Financial Learning,
59 percent of women over the age of 65 won't have a spouse
to take care of them due to divorce, widowhood and increased
longevity. Waiting until you are faced with a long-term care
crisis can leave you emotionally and financially unable to
make the kinds of decisions you would like. And most people
don't want to be a burden on their kids, even if their kids
are successful.
3. I can't afford to save enough money to buy a house.
Or buy a car, or save for retirement ... Most people waste
between 10 percent and 35 percent of their income on unnecessary
discretionary spending. Keep track of where your money goes
for one pay period, and see where the holes in your budget
are. Pick the drains that give you the least pleasure (fast
food, candy bars, etc.), cut them out, and plunk the excess
into savings for that special purpose. For example, walk to
work instead of hailing a cab, and your new walking regime
will let you cancel the health club membership, saving money
both on transportation and club dues.
4. I can carry debt as long as I make the minimum payment
each month.
If you love being in debt, this plan is for you. At the minimum
payment, you'll stay broke. To better manage credit card debt,
pay the new charges and the finance fees each month, plus
$25 to $150 extra. That way, your debt will shrink month after
month, and soon you'll be out of the hole and onto solid financial
ground.
5. I don't have to start saving for retirement until I'm
at least 40.
That's what the baby boomers thought, and now they are scrambling
to set aside enough for old age. The reality is, the sooner
you start saving, and the more you save, the more options
you have later on. If you save diligently from age 20 to 40,
you'll be able to retire early, or at least take time off
from work (and saving) and enjoy yourself.
6. My kids are too young to understand money issues or have
money concerns.
The formative years are when good habits are formed, and
good financial habits are golden. Teach your kids the value
of their money, and how to save, spend wisely, and give money
to those less fortunate. Even small children can begin to
learn concepts that will serve them all their lives.
7. My spouse is on top of things with the bills and taxes
so I don't need to bother with educating myself.
The ability to look after your own finances is important,
even if you don't take care of daily financial issues. What
if someday your spouse isn't there to take care of things?
What if your spouse isn't as savvy as you'd like to believe?
And what if your spouse could use some help from you on occasion
to pay bills or as a sounding board for investment ideas?
The more you know, the better a mate you'll be, and the better
you'll be able to care for yourself and your family. Joining
an investment club for couples is a great way to start working
together as a team. |
