Although Americans are known, adorably, throughout the world
as a culture of loud mouths, we are very secretive about money. Our communal tightlippedness about
financial problems keeps everyone in the dark. Because we are not able to learn
from others’ mistakes, we blindly walk into impending financial disasters,
without a word of warning. Here is a list of some of those terrible money
mistakes.
1. Counting on Social
Security. The Social Security trust fund is scheduled to run out in 2037. People
need to plan their retirement accordingly, in order to make up for this loss.
2. Going Poor From a
College Education. Unfortunately, ballooning costs of education have made
college a financial risk for many Millennials. For many people who grow up
poor, a college education actually increases their poverty.
3. Being Ignorant
About Home Loans. People are often confused about what is required to get a
home loan. For example, 36% of Americans mistakenly believe that a 20%
down payment is always required. One of the big questions any home buyer should
ask is “Does this make financial sense?” In certain situations, you may want to
weigh buying vs. renting.
4. Overspending on
Housing. Conventional financial wisdom states that housing should not make
up more that 25% of your paycheck. To cut costs, consider renting out your home
as an Airbnb, or adding a roommate. Not every home must be a castle.
5. Not Understanding
the Scope of Your Debt. Researchers discovered that people estimated their
credit card debt to be 40% less than what the lenders reported. Families
underestimated student loan debt by 25%. The gap was worse in households with
more than one adult. Researchers posit that people may be good at estimating
their own debt, but terrible at estimating the debt of others.
6. Being Financially
Unfaithful to Your Spouse. About 43% of married couples cannot correctly
state their partner’s salary. What’s even more bonkers is that one in
three adults in a combined financial relationship admits to financially
deceiving their partner.
7. Forgetting About
the Children. Parents in every tax bracket have a hard time talking about
money with their children. Keeping kids financially illiterate can have lifelong
repercussions, none of them good.
8. Forgetting to
Budget. A Gallup poll reveals that only 32% of Americans prepare a detailed
household budget every month. This means the other 68% are just winging
it. Without an accurate picture of where and how money is spent, it is
impossible to make solid financial decisions.
9. Not Saving an
Emergency Fund. Having an emergency fund is the foundation of financial
well-being. Because according to the Federal Reserve, 47% of Americans do not
have the ability to cover an unexpected expense of just $400 without
selling something. It’s virtually impossible to stay out of debt if every
little emergency forces you to borrow money.
10. Financing Major
Purchases by Debt. It makes a lot more sense to put away money each month
for a major purchase, even if it’s in a savings account with a crappy interest
rate, versus paying interest to a credit card company.
11. Buying New. Everyone
knows that cars lose value the second they are driven off the lot. Most people
never think about how virtually the same concept is true for almost every other
new purchase. In fact, buying used goods is one of the ways to save over
$30,000 in less than eight years.
12. Relying on One
Source of Income. Salaried workers with benefits can increase their
financial stability by taking outside work. In shaky economic times, it
literally pays not to put all your financial eggs in one basket.
13. Underestimating
Tax Bills. Make it a point, as soon as possible, to review your tax returns
from previous years to get a clearer picture of what you will actually owe in
taxes this year. If your income varies widely from year to year, get in the
habit of putting at least 10% of every paycheck in a savings account to offset
your taxes.
14. Failing to
Negotiate Prices. Haggling is not just for garage sale shoppers. Big-box
and department stores will usually match competitors’ prices, so it pays to do
price comparisons before buying big-ticket items. Also, cash is king. Many
retailers are willing to adjust prices if you can pay cash. It never hurts to
ask.
15. Overspending on
Gifts. According to the American Research Group, Americans spent, on
average, $861 for holiday gifts last year. There are numerous ways to
hack holiday debt, including making your own gifts.
16. Screwing Up Your
Perks. Credit card rewards are just one perk that people fail to use. Over
the course of the year, people lose thousands of dollars in merchandise and
services by just not using them. This is known as breakage or spillage in
financial parlance.
17. Falling Victim to
Rewards Credit Cards. Rewards cards can have a cost. Additionally, even the
most responsible bill-payers can fall victim to purchase acceleration. People
tend to spend more the closer they get to the reward, often buying things they
wouldn’t necessarily have bought with cash.
18. Not Continuing
Your Education. Learning new things is vital to continued employment. Many
workers accidentally age themselves out of their preferred jobs by not
refreshing their skill set to stay competitive with younger workers. Learning
new skills can also lead to promotions, greater negotiating power, and the
ability to change careers.
19. Missing Out on
Food Stamps, Unemployment, and Other Benefits. Not exploring food stamps
and other benefits when you are struggling is really dumb. The USDA issued a
2012 report stating that lack of information about eligibility is one
of the primary reasons qualifying Americans don’t consider signing up for food
benefits. Shockingly, less than half of all eligible nonparticipants are even
aware that they qualify.
20. Not Seeking Out a
Financial Mentor. An accountant and bookkeeper help people stick to their
financial goals and develop the best practices for managing my money year
round. Even the most money-savvy people can benefit from an outside opinion.
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