We all make money mistakes, that’s simply a fact. But those money mistake we make are a great opportunity for us to learn and grow, and next time do better. So if you’re looking to step up your financial game this year, then here are five money mistakes you’ll want to avoid!
When you have two incomes and presumably more money coming in, overspending is definitely going to be one of those money mistakes you’re going to want to avoid. Granted, anyone can overspend, and many people do but with more income in it might be harder to actually realize you’re overspending. When I’m talking about overspending in this context, I’m not talking about spending so much money you have a bunch of credit card debt and your bank account is in overdraft (though that could be the case), I’m talking about overspending money that you could be saving. Generally speaking, most financial experts say you should be saving 20 percent of your income. But how much to save is a personal choice. I would say that it’s not a bad idea to take a few moments to discuss your future financial plans and figure out how much money you’ll need to achieve those financial goals.
No Financial Goals
Speaking of financial goals… one of the biggest money mistakes that people make is not having any financial goals set. Financial goals are important because they help drive your decision making, and they are often aligned (or should be) aligned with your overall life goals. Do you dream of purchasing your own house? Driving a fancier car? Taking a fancy European river cruise? Whatever goals you hope to achieve with your life will most definitely require money, so here is where you can align your money goals and your life goals.
No Emergency Fund
No emergency fund? Definitely a problem. This is a problem that’s by no means restricted to those households with two incomes and no kids; it’s one of those money mistakes that a lot of people make. But because of that, it requires a reminder. You should always have an emergency fund. Having more income and less “responsibility” (which is a term I use loosely because everyone defines responsibility differently) doesn’t mean when the next financial emergency hits you’ll be ready to fight it head on — not if you don’t have an emergency fund. How much should you have saved for an emergency fund? The experts tend to say anywhere from three to six months, but you could go up to 12 if you wanted to be extra ready.
Having No Estate Plan
I know, I know. You’re healthy, young and ready to take on the world — death, what is that? But not having an estate plan is one of those big money mistakes that a lot of people make. And I mean a lot. The unfortunate fact is that people die suddenly every day and those that pass away without an estate plan leave behind quite a financial mess. A few years back my great grandmother passed away without a will and her children and grandchildren spent the next three years fighting over her will. By the time the case was actually settled, over half of the estate was eaten up by legal and court costs. Having an estate plan simply means that all of the loose ends are tied up, so there isn’t anything left for your loved ones to take care of.
Insurance is one of those I’ll never really need that type scenarios, except when you end up needing it. And if you don’t have it when you need it, it’s going to be too late. Whether that be health insurance, life insurance (yes, you do need it), long-term disability or your average house and car insurance. There are a million different metrics to determine how much insurance you need. Since I’m not an insurance expert, I’ll simply say do your research and make sure you are covered. You don’t want to find out one day you aren’t. What money mistakes are you avoiding this year? Share them below in the comments!
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