3 Giant Money Mistakes Keeping You Poor
There are all sorts of bad money moves we make. While in the moment we don’t think the mistakes have that large of an impact on our finances, they really do. When you keep making the money mistakes over and over again, they have the potential to completely mess up and derail your finances. How do you overcome these big money mistakes?
First you have to learn what they are. In this post are 3 big ones that many people make today. If you find yourself making these money mistakes, follow the advice to correct them sooner rather than later so that they don’t have that big of a negative impact on your financial life.
3 Big Money Mistakes Keeping You Poor
#1. Chasing Yields
Certificates of deposits and savings accounts are yielding squat today. I remember back in the early 2000’s when I was getting 5% from my online bank for my savings account. Now I’m excited if I see 1%.
Since I am young, the low interest rates don’t affect me too much when compared with senior citizens who many rely on bond interest and certificate of deposit interest to supplement their incomes.
Because of the low yields, many investors are chasing higher yields. You see ads in magazines and newspapers all of the time and on TV and radio as well.
In most cases the advertisement doesn’t correctly mention the risks involved with the higher yields. When it comes to investing, you always have to remember that the higher the return (yield) the higher the risk.
If everyone is offering you products that yield 2% and someone comes out of nowhere offering 6%, the alert that something is wrong should be going off in your head. You need to figure out how much risk you would be assuming if you invested in that product. Don’t let the salesman try to convince you that there is little to no risk, because there is a lot of risk.
In fact, the Securities and Exchange Commission has warned about the huge increase in phony high-yield investments recently. Again, remember that a higher return means you are taking on more risk of possibly losing money.
If you want a good yield on your savings, check out CIT Bank. They pay one of the highest interest rates in the country on savings accounts. You can sign up using this link to start growing your wealth faster!
#2. Going Into Debt To Send Kids To College
You want the best for your children. Maybe you never went to college so you want to make certain that your kids have that opportunity. The reality is that they do have that opportunity, regardless if you go into tens of thousands of dollars worth of debt to fund it or not.
Make certain your child understands how much certain schools cost and how much you can afford. Then explain to them how much money they will have to repay if they take out loans in order to afford the high priced school.
Starting out at a community college for two years and then transferring to a four year school is a great option that doesn’t cost an arm and a leg. Another option is to apply for all of the financial aid you can get along with grants and scholarships.
Finally, check out state universities. The prices are more reasonable and many are ranked highly in the annual college rankings.
It is important to save for your child’s education, but make sure you are taking care of yourself first. There are no loans for retirement. And if you think that you will just live poor, think again.
In most cases, your now adult child will step in and assist you. So if money is tight for them, you just made it tighter by going into so much debt to send them off to college.
Going to college is important, but not so much so that you ruin your financial life over.
If you have student loans, be sure to look into refinancing them so you can save some money. You can get an idea of how much you can save for free by clicking here.
#3. Taking Social Security Early
I have many years to go until I can collect Social Security. But when I do, I am going to try to put off taking it as long as possible. That is assuming it is still around!
The reason is because the longer you delay taking it, the higher your monthly check is going to be. Likewise, the earlier you take it, the less your monthly check is.
When Social Security was introduced, it was to help you financially for the few years you had in retirement. Fast forward to today, and we are living well into our 80’s and 90’s. This means you are going to need more money for a longer period of time because you will be in retirement for a longer time. You certainly don’t want to run out of money when you are 75.
But by taking Social Security early, you run that risk. When you factor inflation into the equation, your monthly check that covers the bills now might not cover them in 5-10 years.
Delaying Social Security helps reduce the chances of you running out of money as you age into your 80’s and 90’s.
Final Thots
These are just a few money mistakes that people make. Do you make any of them? If so, make sure you correct them as soon as possible so you can have a stronger financial foundation.
The sooner you can correct any money mistakes you made, the less negative impact they will have on your finances and the sooner you can start growing your wealth.
I’d like to add borrowing from your 401k, borrowing against your home (except maybe for critically-needed repairs) and carrying any balance whatsoever on a credit card. Have I done any of these things? Yes, two out of three – that’s partly how I know they’re mistakes. But living without debt should be the goal and is the only way to be financially free.
As for paying for your children to go to college, often NOT a good idea. I put myself through college in my 30s and bless those parents that made my way affordable by supporting their children so they could extend their dependency and delay becoming adults. Does this describe all college students? No, of course not – some are driven and serious and going places. But it’s my observation that those individuals figure out how to get an education with or without their parents. If you can easily afford to send your kid to college, great. If not, let them know early and they’ll figure it out if it’s important to them.
Some parents have this notion that they need to work hard, borrow money just to send their kids to college. Doesn’t matter if they’re broke. As long as they get education. It’s admirable but you need to be practical in today’s time. There are other alternatives out there. All you need to do is look enough.
I’d add one more, borrowing money to buy new cars when you could drive a used car paid for with cash. I’ve got enough money to have three new Porsche’s if I wanted them but I’m driving an old Toyota 4 Runner that looks nice and runs perfectly. My wife is driving a 2006 Nissan Exterra. We haven’t had a car payment in over 20 years. When most people are paying over $500 per vehicle and have two vehicles it qualifies as a huge money mistake in my book. Just by eliminating those payments and driving affordable older cars most people could move from debt to wealth. The irony is that people often think my wife and I are driving new cars because we chose cars that didn’t see a lot of styling changes over the years and kept them looking nice and shiny.