Financial Mistakes
The Most Common Financial Mistakes to Avoid
Personal financial planning can become complicated when you are dealing with a variety of assets, investments, and income sources. Below are common financial mistakes that families make in managing their money.
Only one family member is involved in financial affairs. It is not a problem for one spouse to have ultimate responsibility for day to day finances, but both should be involved in financial planning.
Life goals are not on paper. Always write down your goals in order of importance.
There is no family budget. Budget carefully so you know what you are spending. It is easier to change what you spend than what you earn.
The family has no umbrella insurance. Acquiring this type of insurance could be one of the wisest investments you ever make.
The contents of your home are not insured up to their replacement value. To maintain your standard of living, buy replacement-cost coverage.
There is insufficient liquidity to handle emergencies or opportunities. Have an emergency fund available equal to three to six months of spending money. Use your budget to arrive at exact figure.
Tax reduction is used as a goal. People devoted too much attention to reducing taxes when they should be concentrating on accumulating wealth.
Employee benefits are poorly understood. Maximize your contributions to payroll savings and 401(K) plans with corporate matching. Also, make sure your group disability plan is adequate.
Investments are not diversified. Buy non-specialty mutual funds, such as index funds. They are relatively inexpensive way to play the market while making your first significant investment step a diversified one.
A general-practice attorney drafts the family's wills, trusts and durable powers-of-attorney. Consult an estate-planning specialist.
No tax projections are made. Know the tax bracket your income falls in so you can better understand what investments are best for you. Read the financial pages regularly and consult with professionals.
Income earners do not have disability insurance. Know your disability coverage needs and seek adequate protection.