Would you like to receive the Freedom Connection?

To receive our monthly email newsletter containing news updates, general interest items, and Freedom Services staff profiles, please contact our Communications Department.

Article Library

Common Money Mistakes - And Their Solutions

From Forbes Magazine - Laura Shin

  1. Not having a budget
    Your budget is the key to achieving all your goals. How you choose to spend your money can either take you closer toward your dreams or further from them – into debt.
    What to do: Take your monthly income, subtract your regular monthly expenses like housing, transportation and utilities, and allocate 20% to 30% to savings, retirement and/or debt. The rest covers your living expenses, like eating out, entertainment, etc.
  2. Paying unnecessary bank fees
    If your bank is charging you for having a checking account, bill pay, having a savings account, overdraft protection, talking to a representative, etc., shop around.
    What to do: Search for a better deal. Consider credit unions which have lower interest rates on loans and charge less for bill pay and overdraft protection.
  3. Not having an emergency fund
    “A lot of times if people have some debt, they think, “I should pay off my debt as fast as I can,” says Sophia Bera, a certified financial planner and founder of Gen Y Planning. But without an emergency fund, your next $1,000 car repair could end up on your credit card.
    What to do: Set aside $100 or even $50 a paycheck. At a minimum, have an extra $1,000 on hand, and eventually build up a cushion of three to six months of living expenses – in cash, not investments.
  4. Not taking advantage of your full 401(k) match
    Some companies offer a match for their 401(k) program, which means that as long as you contribute a certain amount, the company will “match” your contribution – basically giving you free money.
    What to do: Find out from your Human Resources Department what you need to do to get this free money and do it.
  5. Not contributing to retirement with your first paycheck
    “Young people don’t feel like they’re making enough money, and retirement feels so far off” says David Jackson, a certified financial planner at Kansas City-based Waddell & Reed. For this reason, they don’t contribute toward their retirement.
    What to do: Put enough money toward your 401(k) to get your company match, if you have one. Then put away money in your Roth IRA up to the limit. After that, contribute extra money you have for retirement toward your 401(k) up to the limit.
  6. Not knowing how much to save for retirement
    “Most people have no clue how much they should save for retirement at what rate of return,” says Jackson. “It’s like shooting a gun with no target.”
    What to do: Jackson says most people start with “What can I afford?” when they should really be asking, “How much do I need?” Use an online retirement calculator to find out and see how much you’ll need to put away monthly now to reach that goal.
  7. Not doing any estate planning
    If you have kids, own a house jointly with someone else or own a business, your wishes may or may not be granted when it comes to who will take care of your children, who will receive your assets or how your end-of-life care will be handled.
    What to do: If you don’t have proper beneficiaries on your retirement accounts, name them now. For a will, work with a local estate planning attorney in your area.
  8. Not having the right type, or enough, of life insurance
    When you have children or dependents, you should have life insurance but having a policy that doesn’t suit your needs can be a waste of money. Whole life insurance will cover you and your entire life, but more affordable term insurance – which covers you anywhere from 5 to 30 years, such as a period when your children will be dependent on you – may suffice.
    What to do: Work with a financial planner who will evaluate your entire situation. Also, know what kind of insurance your company offers.

Visit the Forbes website for the full article and slideshow.