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Consumers make costly financial errors

By Marcie Geffner · Bankrate.com
Saturday, October 6, 2012
Posted: 6 am ET

If you've made at least one really bad financial decision during your lifetime, you're not alone.

In fact, 67 percent of U.S. adults, defined by their income to be middle-class, admitted in one recent survey that they'd made such errors. Nearly half, 47 percent, acknowledged that they'd made two or more bad decisions.

The median cost of these bad decisions was $5,000, but the average hit $23,000. That suggests more people made less costly mistakes, but the missteps that were expensive really broke the bank.

The national survey of 2,015 U.S. adults was conducted by ORC International in July.

The survey also found that 45 percent of the respondents said they'd obtain information and advice from a financial professional before they made a decision about saving or investing. But 17 percent said they'd make such decisions without seeking advice and only 15 percent said they'd rely on the Internet, publications or TV for information about saving and investing.

The survey also found middle-class earners were more risk-adverse than those who attained higher incomes. Given $1 million (hypothetically) to invest for retirement, 48 percent of those who earned more than $100,000 annually said they'd invest in stocks, bonds or mutual funds. Only 21 percent of middle-class respondents said they'd make such investments while 25 percent said they'd invest the money in real estate and 19 percent said they'd put the money in a savings account, which hardly qualifies as an "investment."

The findings are part of a new report, "The Financial Status and Decision-Making of the American Middle Class," which concluded that most middle-class families face challenging financial conditions.

Stephen Brobeck, executive director of the Consumer Federation of America, a nonprofit association of 270 consumer interest and advocacy groups in Washington, D.C., said in a statement that the researchers were surprised at how highly the middle-class respondents rated their ability to make financial decisions and how infrequently they relied on information from the Internet and publications, considering their past mistakes and the complexity of the financial services marketplace.

Follow me on Twitter: @marciegeff.

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