| 10 money mistakes to avoid repeating |
| By Dana Dratch
• Bankrate.com |
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Remember the movie "Groundhog Day," the
one where Bill Murray kept reliving the same day? Some people live
their financial lives like that, making the same mistakes over and
over.
But you don't have to be one of them.
| To help you avoid being a repeat
offender, here are 10 of the common money errors that
many of us make repeatedly, along with the real-world
cost of each and a better way to handle each situation.
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| 10 biggest money
blunders |
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1. Spending
without a budget. Many times when people think of financial
planning, they think only in terms of investments, says John K.
Ritter, CFP, co-owner of Ritter Daniher Financial Advisory LLC in
Cincinnati. But if you have income and bills, you also need a budget.
Too many times, "there is more outgo than income," he
says.
The cost: Your financial peace of mind and the ability
to plan long-term. "Easily, I would think people misstate what
they think they are spending by every bit of 15 to 20 percent,"
says Ritter.
Instead: Keep track of what you spend to get an idea
of where your money is going. "The key is to account for those
things that aren't regular bills -- groceries, entertainment dollars,"
he says.
And set a little aside for one-time emergencies, like
car repairs, a broken washing machine or a trip to the emergency
room. People tend to leave those kinds of expenses out of a budget
because they tend to be one-offs. "What they don't tag is that
there are always one-time expenses," says Ritter.
2. Carrying
a balance on credit cards. Interest rates are 18 percent
to 21 percent or more, says Annette Simon, CFP, principal with Mosaic
Wealth Management LLC, in Bethesda, Md. "People making minimum
payments never get the thing paid off," she says.
Another way to think of it: Treat yourself to a nice
dinner, and 20 years from now you'll still be paying for it. "In
general, carrying a balance on your cards is a terrible idea,"
she says.
The cost: If you have a $5,000 balance on a card with
an 18 percent annual percentage rate, or APR, it will take 26 years
to pay if you just make the minimums. Including interest, you'll
end up shelling out more than $12,000. (And that's assuming you
never use it again, make every payment on time and don't incur any
fees.)
Instead: Pay balances in full each month. If you need
to use a credit card to handle an emergency (medical bills and car
repairs, not a quickie vacation), use it, then stop using credit
until you have that bill paid.
3. Ignoring
interest rates. Whether it's your money market rate or what
you could get on a mortgage refinancing loan, it pays to keep up
with the current prices of borrowing and lending money, says Beth
Gamel, CPA/PFS, an executive vice president with Pillar Financial
Advisors in Waltham, Mass.
The cost: Lost income if you could have been getting
a higher rate of return on your CDs or money market account. Higher
mortgage payments if you don't take advantage of lower mortgage
rates.
Instead: Stay abreast of the interest trends that
impact your personal finances.
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