Money Mistakes you Can’t Afford: Lim Part I

by James & Miel on July 25, 2006 · 0 comments

One of the better books in our small collection of personal finance literature is “Money Mistakes You Can’t Afford to Make“. The author is a former columnist for US News and World Report, Paul Lim.

Lim’s book outlines a few important, “can’t miss” points. We’ll briefly outline some of them here and then discuss a bit how they relate to our own personal finance.

1) Shortchanging Yourself. By shortchanging yourself, Lim means that people commit a variety of common mistakes. These are:

  • Not establishing an emergency fund
  • Putting your emergency savings on the stock market
  • Not paying down debt
  • Not automating your savings

Miel is more pro emergency fund, James prefers to put available money on the stock market. We debate this particular point. However, we both agree that paying down debt and automating savings are good moves. These two factors have helped us reach our goals.

2) Getting Fee’d Up.

By this, Lim means that maintaining accounts or purchasing investments which have high fee structures. This includes banking and brokerage fees. For example, we a savings account with Washington Mutual. This account charged us 9 dollars a month. Given the amount of money in the account and its rate of interest, we were actually LOOSING money by keeping that account. We closed it. You should do the same. ING, baby, all the way.

Lim doesn’t say so specifically, but utilities can also play into this. For example, our local utility providers like COMCAST or T-Mobile have periodically tried to charge us junk fees.

3) Not Knowing Your Credit Score

This encompasses several things related to having healthy credit. According to Lim, Some of the biggest mistakes are:

  • Not paying debts on time
  • Owing too much
  • Shortening your credit history
  • Seeking too much new credit
  • Maintaining a poor mix of credit
  • Not checking your credit report

We essentially agree with Lim that you should avoid these mistakes. Keeping these things in mind, we both manage to have exceptionally good credit. We would admit that James was a bit disappointed when Miel had a higher credit score, even though he had more money!

These are the first three mistakes to avoid, which are the most simple, and are likely to have the greatest appeal to the average Joe. Lim says more about investing and retirement, but this doesn’t apply to everyone. For example, most folks have a checking account and a credit history, but fewer directly invest in stocks.

We think the book has some merit and is worth sharing with our readers, so we will be posting on the rest of it at a later date.

Stay tuned!

Miel & James

p.s. in case you are interested, the books full citation is:

Lim, Paul J. (2004) Money Mistakes You Can’t Afford to Make: How to solve common problems and improve your personal finance. McGraw-Hill, New York.

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