Tag Archives: Financial Mistakes

Financial Traps to Avoid

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There’s a reason why even athletes, entertainers, and business people with seven-figure (and higher) incomes suddenly find themselves filing for bankruptcy. Money mismanagement can eat through even the biggest bankrolls. Here are some specific threats to financial stability that people can avoid to help effectively manage their wealth.

No Budget

A survey by Debt.com revealed that 90.24% of respondents believed everyone should have a budget (though only 85.6% of the respondents said they used one). Half of the survey respondents said they’re living paycheck to paycheck, which may help explain why they consider budgeting to be so important. Budgeting does not have to mean skipping coffee and driving a jalopy for the rest of your life. It does mean paying close attention to how much money comes in and where it all goes. Use your financial goals to guide you in steering your money in the right direction.

Too Much Debt

If you have a lot of debt to pay off, a budget is even more important. It helps reduce the likelihood of relying on more credit to fill the gaps. A budget also helps you to collect all those extra dollars and cents that you could put toward paying more than the bare minimum on debt. When paying off debt, start with the higher-interest accounts first and work your way through to save money.

No Protection

Insurance can be expensive, but going without insurance can be even more so. Renters, homeowners, auto, health, disability, and life insurance policies are the main ones you should consider. If you have a business — especially if it is your main or only source of income — getting business insurance can protect your livelihood in the event of a mishap with a client or customer.

No Retirement Planning

A survey by Clever estimated that nearly 30% of Americans have nothing saved for retirement. The survey also revealed that retirees who have saved have, on average, only $191,659 saved for retirement, which is far less than the $514,800 recommended by experts. Because of this, Americans continue to hold stressful, low-paying jobs well into their retirement years. It is never too early to start planning for retirement, no matter how small your contributions are. Remember to take advantage of matched contributions from employers whenever possible.

Too Much Risk

There is no investment that is 100% without risk. If there were, the returns on that investment would be negligible. Even so, taking on too much risk at the wrong time can lead to big financial problems. Taking on high levels of risk is appropriate for young people who have more time to recover and is not advised for people nearing retirement.

Shady Investments

Even worse is when risky investments turn out to be fraudulent or shady. In fact, the more risk-free an investment sounds, the more you should do some digging. This holds true whether the business or individual you plan to invest in is a stranger or your brother. People who miscalculate or fail to do enough research can cause you just as much financial damage as fraudsters.

Poor Tax Management

No matter how much or how little money you make, tax management is a great way to help keep money in your pockets. This is especially important after a large windfall, such as an inheritance. For instance, if you inherit an Individual Retirement Account (IRA) and choose to cash out, you may lose a portion of this in taxes. Divorce is another time of life when tax management is key.

Mismanaged Assets

Stocks are often traded frequently, making them active investments, but you still need to ensure your portfolio stays balanced. Similarly, if you have a home, keeping up with repairs and improvements maintains and grows its value. Unmanaged assets also pose a problem, such as when people allow large sums of money to sit in accounts with low to no interest rates and high fees.

For some people, money management is a talent and financial literacy is almost an inborn skill. Many other people, however, could use a little help making financial decisions.  Contact First Financial’s Investment & Retirement Center by calling 732.312.1534 to speak with professionals who can help steer your finances in the right direction.  You can also email mary.laferriere@lpl.com or maureen.mcgreevy@lpl.com

Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker/dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. First Financial Federal Credit Union (FFFCU) and First Financial Investment & Retirement Center are not registered as a broker/dealer or investment advisor. Registered representatives of LPL offer products and services using First Financial Investment & Retirement Center, and may also be employees of FFFCU. These products and services are being offered through LPL or its affiliates, which are separate entities from and not affiliates of FFFCU or First Financial Investment & Retirement Center.

Securities and insurance offered through LPL or its affiliates are:

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal.

This material was prepared by LPL Financial, LLC

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Common Financial Mistakes We’re All Guilty Of

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Some financial mistakes are all too common. So common in fact, that you might not even realize you’re making one. Keep reading to find out what some of the most common financial slip-ups are, and how you can avoid or get yourself on the right path to correcting them.

1. The Problem: Using credit cards for everything. This financial mistake is very common (quite arguably the most common), and can get you in a lot of trouble if you aren’t careful. We know it’s very easy to swipe/insert your chip card and go, or pay with a credit card that’s already saved in your digital wallet or P2P payment app. However, living on credit cards comes with the potential to rack up a huge amount of high-interest debt if you aren’t paying your bill in full each month. Over time, this interest and debt will continue to increase if you keep using your credit card. This only leads to a vicious cycle of accruing debt.

The solution: Set a budget for yourself, pay only with cash or a debit card, and when that money is gone until your next paycheck – it’s gone. Try not to live above your means, or keep purchasing and adding on debt and interest with out of control credit card spending.

2. The Problem: Not checking your credit report. ID theft is all too common these days – most people have been a victim of some type of financial scam or a fraudulent purchase. If you don’t check your credit report from time or time (or at the very least once a year), you could be a victim of identity theft and not even know it.

The solution: All consumers are able to get at least one free credit report per year through annualcreditreport.com. Be sure to check yours at least once a year, and make sure any open financial accounts or loans are actually yours. If you find any mistakes or fraud on your credit report, you will need to file a dispute with one of the credit bureaus. Should there be fraud on your credit report, it’s also a good idea to add a security alert to your credit report.

3. The Problem: Looking to buy a home you can’t afford. Sure, owning a home is probably one of the biggest financial milestones in life – however, buying one you can’t afford is sure to become a nightmare. Financing a home you can’t afford will create enormous financial stress, and not leave you much room to pay for other necessities. In turn, you may end up reverting to problem #1 above – and finance other things you can’t afford on credit cards. This could all snowball into massive amounts of debt you might never be able to financially recover from, and lead to bankruptcy and/or foreclosure.

The solution: Set a realistic homebuying budget for yourself. Check out our handy homebuying guide and checklist to ensure you find the perfect home for you, without putting too much strain on your finances. Also keep in mind future expenses that come with homeownership – furniture, maintenance, and utility bills. Be sure you can afford the monthly mortgage payment along with these additional expenses comfortably before you put an offer in.

4. The Problem: Not planning ahead for your financial future. This common financial mistake is multifaceted. The first mistake consists of not having an emergency savings account. Throughout life, financial emergencies and unexpected expenses are going to pop up. Not having an emergency savings account to fall back on should your car break down or if your home gets a leaky roof, may lead you to again revert to problem #1 at the beginning of this post – charging on high-interest credit cards.

Another financial problem that stems from not planning ahead is having minimal or no retirement savings. Many of us put off the thought of retirement – thinking that it’s way off in the distant future, but the reality is that it takes years of working and saving to secure the funds you’ll most likely need once you’re retired.

The solution: Start putting money into an emergency savings account as soon as possible. This can be extra money not spent leftover from each paycheck, or you can even set up a direct deposit from your paycheck that goes into a special savings account automatically. Setting up an automated direct deposit will most likely allow you to save more and faster, because it takes the thinking out of it and your savings will continue to grow. It’s like that phrase, “set it and forget it.” This way, when you truly need the money in an emergency – it’s there.

As far as retirement is concerned, the sooner you start investing – the more money you’ll have in your retirement years. Many employers even offer matching retirement contributions, which you should definitely look into if this is something offered by the company you work for. If you don’t know where to begin with retirement planning, it’s best to talk to a local financial advisor to help set you on the right path.

At First Financial, we’re here to help our members achieve financial success and meet their goals. You can get in touch with our representatives at 732.312.1500 or by stopping into any of our local branches.

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A First Financial membership is available to anyone who lives, works, worships, volunteers or attends school in Monmouth or Ocean Counties. See credit union for details. A $5 deposit in a Base Savings Account is required to establish membership prior to opening any other account/loan. 

 

What to Do After Money Mistakes

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Have you made a financial mistake that you’re struggling to recover from? Maybe you’ve overspent on credit cards, taken out too many loans, or invested in a risky venture that didn’t pay off. Whatever the case may be, it’s important to remember that you’re not alone. Many people have faced similar challenges and have come out the other side stronger and more financially savvy.

If you’re ready to move on from your money mistakes and start fresh, here are some tips to help you get started.

Accept responsibility, but forgive yourself

The first step in moving on from a financial mistake is to accept responsibility for it. Acknowledge that you made a mistake and take ownership of it. This will help you to move forward with a clear mind and a determination to make things right. But don’t be too hard on yourself—financial mistakes happen, and are part of the learning process.

Learn from your mistakes

Once you’ve accepted responsibility, it’s important to learn from your mistakes. Take a close look at what went wrong and identify the factors that contributed to your financial misstep. This will help you to avoid making the same mistake again in the future. Sometimes it can be easy to ignore financial mistakes, but the more you ignore them – the more they will become a recurring or bigger issue.

Make a plan

Now that you know what went wrong, it’s time to make a plan to get back on track. Start by setting realistic financial goals and creating a budget that will help you to achieve them. Make sure to include a plan for paying off any debt that you may have accumulated, and for improving your credit score if the financial mistake might have caused it to decrease.

Stay focused

It’s important to stay focused on your goals and to resist the temptation to fall back into old habits. Remember that financial success is a journey – not a destination, and that it takes time and effort to achieve.

Seek a professional

If you’re struggling to create a plan on your own, don’t be afraid to seek advice from an expert. A financial professional can help you to create a plan that will meet your specific needs and goals.

By following these tips, you can move on from your money mistakes and start fresh. Remember to be patient with yourself, stay focused on your goals, and seek help when you need it. At First Financial, we’re dedicated to helping our members achieve financial success and meet their goals. You can get in touch with our representatives at 732.312.1500 or by stopping into any of our local branches.

For more money advice, subscribe to our First Scoop blog!

Big Financial Mistakes You Don’t Want To Make

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Reality check: there is no such thing as a perfect financial plan. While it may be difficult to achieve perfection in our planning, there are things we can do to avoid making the big mistakes. Here are three examples of financial mistakes that people often spend decades trying to recover from:

Thinking that you don’t need a budget (or it’s impossible to follow one for your situation).

  • “I know that budgeting is important, it just hasn’t worked for me.”
  • “It’s too hard to follow a budget.”
  • “I have a general idea of where my money is going but not a written plan.”

Similar statements are shared in financial planning meetings and during meaningful discussions between friends and family on a regular basis. We all have life goals and a vision for how we think our money should be aligned with those things that matter the most to us. The problem is that the lack of a budget is a major obstacle standing right there in the middle of our path.

Let’s call a budget by its proper name and purpose – it’s really a “personal spending plan.” These spending plans give us awareness of where our money is going and help us prioritize financial decisions. Too many people think budgets are just for those who are struggling to make ends meet. In reality, we all need a personal spending plan and it needs to be more than just a brain cloud of good intentions. It needs to be in writing.

The good news is that it doesn’t have to be perfect. Your budget can be as simple or complicated as you want it to be. Try to make saving, paying the bills, and paying off debt automatic. Then check out automatic budget tracking tools like Mint or GoodBudget to see if one might be worth adding to your budgeting tool chest.

Relying on credit card debt to pay for lifestyle choices.

If lack of a personal spending plan is a problem that can delays financial life goals, then debt issues may prove to be even bigger obstacles on the path to important goals like retirement. For example, Alicia and Tony, a couple in their 30’s, are trying to balance the competing goals of paying everyday living expenses, digging out of credit card and student loan debt, and raising 3 kids. They saw firsthand how seemingly small credit card balances can pile up in a hurry. If not addressed early enough, the financial stress will continue to increase along with that debt.

Initially, they said the combined balances owed on these cards usually never exceeded $2-3k. However, shortly after the birth of their twin daughters, Tony’s job was eliminated. Unfortunately, this major life event did not result in major changes to their lifestyle. Tony eventually decided to start his own home-based business funded in part with personal credit cards and their total balances ballooned to over $35,000. While some of these credit card expenses were for necessary items, most were for lifestyle choices, or “wants” and not “needs,” that could have been avoided.

If you have revolving credit card balances, an innocent night of fun and revelry could end up costing hundreds if not thousands of dollars over time if it’s funded by plastic. We also tend to spend more when we swipe a card compared to simply paying with cash. Credit cards are not necessarily a bad thing, especially if you have the discipline to pay them off in full each month. In fact, you can rack up some nice rewards and let the 34% percent of Americans that have revolving credit card debt help pay for your perks. After all, the average consumer spends $2,630 per year on credit card interest.

The best way to make sure that you’re not using credit cards the wrong way is to create a “24-hour rule” for all purchases with credit. If you can’t pay off your balance in full within 24 hours, then you shouldn’t buy that item. If you can’t manage that plan, it may be time to cut up those cards.

How we choose to manage our personal finances says so much about our life goals, values, and priorities. These financial decisions also demonstrate how we balance living in the moment with the need to plan for future goals. This balancing act can be a struggle and that is exactly why the simple act of creating a basic financial plan can help you stay focused on what matters the most to you. Just remember to avoid making the big mistakes when creating and following your financial plan.

Be sure to utilize First Financial’s free, online debt management tool, Debt in Focus. In just minutes, you will receive a thorough analysis of your financial situation, including powerful tips by leading financial experts to help you control your debt, build a budget, and start living the life you want to live.

*Original article source courtesy of Scott Spann of Forbes.com.