Top 5 Personal Finance Blunders

Personal finance can be a tricky subject to master. You may feel comfortable with the stock market or perhaps you’ve taken on a mortgage or two, but there probably are a few areas you haven’t mastered yet. For this reason, I’d like to discuss five common blunders people make when it comes to their money. Read carefully, and you could avoid some major pitfalls.


1. Not taking advantage of a company retirement plan
Do you have a 401k or 403b plan in your workplace? How about a profit-sharing plan, or maybe a SEP IRA? All of these plans have the same basic goal: to reduce the amount you pay in taxes and help stash away funds for retirement. Unfortunately, lots of people aren’t contributing enough, if anything, to these plans.
There are a few reasons this happens: first, the paperwork is confusing and time-consuming. Most people don’t want to flip through 10 pages of financial jargon if they don’t have to. Also, many companies don’t dedicate enough resources towards investor education. As a result, people often make bad decisions when it comes to their retirement plans. This could include not diversifying their investments, or simply not contributing as much as they could into the plan. I recommend you get some information about your retirement plan at work, sit down with it, or bring it to somebody who can help you understand it better.
2. Not checking your credit score often enough
Have you ever applied for a loan, only to find that your credit score was worse than you thought? This happens way too often and can be easily avoided. Being responsible with your money includes always checking up on your credit score, not just prior to applying for a loan. Most credit score range from 400 to 850 and a great credit score is above 700. Credit scores come in handy when you are trying to buy a house, lease a car, open a new credit card or even help your child pay for college.
A good credit score will often secure you a lower interest rate, resulting in lower payments on the money you may borrow. If the very first time you pull your score is a month or two before applying for a mortgage perhaps, you may be surprised to find that it takes time and energy to read through the reports and verify the information. Plus, you may need time to dispute parts of your score that may not be correct.
Well, you may be asking, how do I find this lucky (or unlucky) number? You can get a free copy of your report at a few different websites, including: www.annualcreditreport.com or www.freecreditreport.com. You may also consider signing up for a credit monitoring service. With this convenience you’ll get a notification e-mail when your score changes, so you can quickly check it out and see that everything is correct.
3. Sticking to a Budget
Knowing where you spend your money can expose some very interesting things. In fact, I bet a simple analysis of your monthly budget would shock you. I’ve met people who spend almost 50% of their after-tax income on eating out and others who spend 75% on rent. These are big blunders that we should all avoid.
A well-known financial advisor by the name of David Bach often talks about knowing your “latte-factor.” This is a reference to walking into Starbucks each morning and buying a $5 latte. It’s a great analogy for paying attention to where you may waste $5 or $10 during the day, which could be going towards your future. Cutting a daily habit—perhaps coffee or cigarettes—can make a huge different in your overall financial success.
I recommend you track your expenses for a few days. See where your money is going and try to factor “paying yourself” into that equation.
4. Procrastinating – Putting off Saving
Are you nodding your head right now? All kinds of studies come out each year which show that saving a little bit of money in your 20’s and 30’s is dramatically more valuable than saving larger sums of money in your 40’s and 50’s. Why? Time—not the amount of money—maters most when it comes to saving for long-term goals.
If you’re 25 and just started on a new job, don’t ignore that 401k plan because you’d rather spend money with friends. Even small sums of money can really add up when you consider the compounding affect of interest, dividends, and capital gains in your portfolio. What does that mean? Start saving early in life and get yourself excited about your saving!
5. Trying to Beat the Market
This is a lesson people often need to learn from experience. Do you think that you could earn more than your neighbor by picking your own stocks? The concept of “beating the market” is very exciting, but also somewhat unrealistic. Most people fall into the emotional patterns of buying stocks at the peak of the market and selling them after they dip down. Studies show that the large majority of people who try their hand at investing ultimately come up short. Not only that, it actually uses up valuable time that you could be spending building a business, being with family, or anything else.
Good luck!
Russell Bailyn
Wealth Manager
Premier Financial Advisors
14 E. 60th Street, #402
New York, NY 10022
P: 212-752-4343 *31
F: 212-752-7673
rbailyn@premieradvisors.net
Securities and certain investment advisory services offered through: First Allied Securities, Inc., a registered Broker/Dealer. Member: FINRA/SIPC. Premier Financial Advisors, Inc. is a Registered Investment Advisor. First Allied Securities & Premier Financial Advisors are not affiliated entities.

One thought on “Top 5 Personal Finance Blunders”

  1. I have a 401K rollover from previous job. I currently have those funds invested in equiies. The current fee’s to secure those equities are too expensive. I want to move my 401K rollover as well as look at my options of converting it to a 401K Roth. I would move to the roth over the next two years so my 401K would grow tax free moving forward. I understand that I would have to pay taxes on the portions moved to the Roth, are those subject to the 10% early widthdrawe fee? Is there a table that I could enter in numbers to get a better picture if I were to make this move?
    Thank you!

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