Regardless of your age, there are some very basic personal finance rules that are critical for success. Rules such as avoiding having a balance on a credit card that charges high interest and spending money only within your means apply to people of any age. However, there are some financial mistakes you should avoid that are specific to your age.
In this article you will find the most costly mistakes to avoid, listed according to age.
• Credit card debt – Many young professionals that begin their new career make the mistake of using a credit card to finance their vacations, nights on the town, and a stylish wardrobe. Using your credit car for expenses like this is a terrible financial move. Interest accrues month after month on any balance that is left unpaid. Unless you can pay your balance in full each month, do not use your credit card.
• Not contributing to a 401(k) – Many young professionals make the mistake of not contributing to a retirement plan that’s offered in the workplace because they are unsure of how long they will stay at the job. Don’t make this mistake, especially if your employer offers matching funds. When you start a job, contribute 10-15 percent of your income. You can roll it into a new plan or an IRS when you leave the job.
• Not getting professional guidance – Don’t make the mistake of thinking you have to be self sufficient in regards to handling your money. In order to determine how to achieve your financial goals, seek the help of a financial coach, financial planner, or Registered Investment Advisor.
• Not establishing an emergency fund – At a bare minimum, it’s critical that you have six months worth of living expenses in a savings account that’s FDIC insured. Depending on your situation, you may need up to 12 months of living expenses in the bank. An emergency fund can save you from financial disaster if something unplanned for comes up.
• Inadequate retirement savings – As you grow older, your paychecks typically grow larger. With a bigger paycheck, you may be tempted to spend more money on cars, vacations, or designer clothes. Rather than spending your money carelessly, you should increase your retirement contributions.
• Lack of proper insurance – With the right amount of the right type of insurance you can reduce risks and ensure that your family will make it through tragedies like accidents, illness, or death. While insurance is not going to increase your wealth, it provides protection.
• Failing to plan for retirement – While you still have about twenty more years of work ahead of you before you retirement, you have to realize that this day is getting closer and start planning according.
• Failure to eliminate debt - While continuing to save for retirement, start making extra payments on any debt in order to free up as much of your discretionary income. With less debt you can build your retirement savings faster.
• Ignoring teaching opportunities – Rather than letting your children drain your savings account, teach them about managing their money. Teach them how to create and stick to a budget, open and contribute to a savings account, set financial goals, and invest in their own retirement. Most people don’t realize that minors can contribute to an IRS as soon as they get a job.
Regardless of your age, you can avoid costly financial mistakes and start building a secure future.