Common Financial Mistakes
In today’s unreliable economy, more and more people are paying attention to their spending, investing, and long term financial goals. But just because you’re aware of your finances doesn’t mean that you’re not making mistakes. Here are some of the most common mistakes that people make with their finances.
Buying Premium Gas
Oil companies and gas stations market premium gas as a “treat” for your car, claiming that it benefits your engine, gas mileage, and other factors. AAA has found no significant difference in using premium and regular gas, and has found that U.S. consumers waste billions of dollars springing for premium, while seeing no tangible benefits.
It’s better to spend that money on regular car maintenance and higher quality oil, which does affect your car’s engine. Any time any service or product claims to save you money, you should look into the validity of that claim.
Sometimes this may involve testing the product yourself, while other times you can find studies and testimonials from other people. Companies want to sell things to you, so always take their claims of savings with a grain of salt.
Letting Long-term Care Insurance Lapse
Insurance costs are reasonably priced when you’re young and less likely to use them. As you age, the prices go up with your increased likelihood of health conditions, medical costs, and long term care needs.
Cost is one of the reasons that one quarter of seniors let their insurance lapse. If you’re getting up there in age or have a parent who may need assisted living in the near future, look at the state of their finances and the current cost of long term care.
If you’re worth between $200,000 and $2 million, you may want insurance to keep all your wealth from going to long term care.
Also consider your family’s finances and whether your health costs are likely to be a burden to them. These considerations can help you determine what insurance plan may be right for you.
Considering Purchases Investments
Despite the common vernacular, investments are not simply purchases that “pay off”. Buying an x-box because it will save you money on outside entertainment isn’t an investment. It’s a purchase.
There are wise and unwise purchases, as well as unwise investments. The key with investments is that even wise ones take a long time to pay off. They’re not items that save you money; they are money that has potential for significant monetary gain in the future.
Buy justifying purchases as investments, people make it easier for themselves to spend money that could otherwise be earning interest. You should definitely make purchases that will improve your quality of life and save you money, just don’t conflate them with actual investments.
Giving Up on Investments too Early
The biggest mistake that people make regarding investments is giving up at the first sign of a decline. Markets are constantly in flux. There will be good years and bad years.
What you want to look at is the overall return over the life of your investment and the market forecasts for the industries you’re invested in. If you have a diverse portfolio, it’s usually best to keep your money where it is. Some will go up, some down, and you’ll likely come out ahead in the end.
Finances can be complicated and frustrating, but if you pay attention to where your money is going and whether you’re seeing actual benefits, you’ll end up a lot better off in the long run.
Jeriann is currently paying off her student loans while trying to not put her whole life on hold in the process. You can follow her adventures, financial and otherwise, at her blog, dairyairhead.com.
Category: Family Finances
