| 10 money mistakes to avoid repeating |
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4. Not investigating disability
insurance. "Anyone earning an income and supporting
themselves needs disability insurance," says Simon. More than
20 million people sustained disabling injuries in 2002, according
to the National Safety Council.
The cost: If something keeps you out of work for a
few weeks or months, disability insurance could mean the difference
between cutting back on a few expenses while you get back on your
feet or moving in with family or friends.
Instead: Coverage can be expensive, so find out if
your employer offers any kind of plan. If not, do you have the savings
to support yourself for a couple of months if you couldn't work?
If the answer is no, shop around, and see if you can find a policy
in your price range.
5. Failing
to recognize how much little purchases add up. Small amounts,
like small leaks, can really drain your wallet. Analyze everything
from those nonessential snacks to out-of-network ATM charges to
those extra phone plan minutes you're not using.
The cost: If you're like most people, this costs a
good chunk of your paycheck.
Instead: Take the records of your cash purchases and
lay them side-by-side with your debit and credit card statements
to get a complete picture of where you're spending, says Jill Hollander,
CFP, president of Financial Connections Group Inc. in Berkeley,
Calif. The questions to ask, she says, is: "Where are you spending
that money, and does it make sense?"
6. Not taking
advantage of an employer match for retirement funds. One
of the biggest mistakes that lots and lots of people make, especially
young people, is not investing in their employer's retirement plan
at least up to the point where they get the employer's match,"
says Simon. "By not doing that they're leaving additional income
on the table."
The cost: An additional 3 percent to 5 percent of
your salary annually. Plus a few decades of compounding interest.
Instead: Figure out how much you can afford to contribute,
and have the money taken out of your check.
7. Waiting
until the last minute to fund your IRA. "A lot of people
wait until April instead of setting aside throughout the year, then
they don't have the money," says Hollander.
The cost: A more comfortable retirement. Contributing
$4,000 annually to a Roth IRA (and estimating a 5 percent return)
will result in roughly $89,000 in 15 years. With the same terms,
$1,000 a year leaves you with a little more than $22,000.
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