April 16, 2013

Five common mistakes consumers make in managing personal finances

These mistakes are called “common” for a reason; most consumers make them at one time or another when managing personal finances. Here’s the five most common mistakes in personal finance, be sure to watch out for them:

  1. You didn’t do the math. We know. You have better things to do than spending your time clipping coupons. But take a look at this amazing statistic. The Wall Street Journal calculated the hourly return for dedicated coupon clippers. It was a whopping $86.40 per-hour!
  2. You have an anorexic savings account. If you have a philosophy of spend today, save tomorrow, you may be very unhappy with your choices once you hit your senior years.  Remember who your fund manager is for your major retirement account? For most Americans, it’s Social Security. Uncle Sam is not known for his frugal ways, so what was promised yesterday may not materialize tomorrow.
  3. Spending too much. Ah, it’s so easy to spend, and so hard to save! Kraig Mathias, a blogger for Young Cheap Living suggests a regular fiscal checkup. Is your spending at a feverish level? Is your bank account in a deep chill? Do you have lesions eating holes in your wallet? The cure to these ailments is to cut back on spending.
  4. Too much or too little insurance. Don’t you just love insurance salesmen? Allstate’s fictional character ”Mayhem” has sold a lot of insurance, with a humorous play on people’s fears. Approach insurance coverage with logic, not emotion.
  5. Underestimating retirement costs. Fast-forward 20 years, and there will likely be a huge cohort of Baby Boomers feeling deep regret that they didn’t save more. The cost of living is not going to become magically less in 2033.

It’s never too late to embrace fiscal responsibility. Don’t wait for Uncle Sam. Just do it!

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