Money Mistakes To Avoid

Thinking that we don’t make mistakes is a mistake.  We all make them, some of us a lot of them!  But being aware of the mistakes and then taking action to avoid them in the future feels as good as turning chicken feathers into chicken salad; seizing victory from defeat.  And some categories of mistakes can hurt us more than others.  Wearing two different colors of socks won’t seriously deflect us from the path to happiness, but money mistakes certainly can, and too often do.  Big time.

Mistake correction can’t take place until the mistake is identified and faced up to.  There are very few, if any, small money mistakes.  And so, the following list of common mistakes involving money is offered.  It’s up to each of us individually as to whether we do some self-examination and acknowledge any guilt.

Warning – soul searching and resolving to improve can be really messy!

Failing to plan

In the genealogy of money mistakes, this is the grand-daddy of them all.  The overused expression “Failing to plan is planning to fail.” may be corny as all get-out, but that doesn’t mean it isn’t true!  Getting along in this world requires us to be aware of where we are, having some idea of what’s coming at us, and most importantly devising some way of dealing with what’s coming and surviving until tomorrow.  Only to repeat the process in terms of the following day.  And so on.

And the need for us to apply this cycle to our money is no less important than applying it to crossing a busy street or insuring our next meal.  Actually, the money and meal analogies are the same thing!  We need to do two things; we need a way to objectively measure where we are financially at the moment, and then we need to project our current money status into the future to understand what it holds in store for us.  OK, three things; we also need to figure out where to start and what to actually do!  (It is no coincidence that our 7 step MINT Method guides you in doing precisely these three things.)

Putting off retirement saving

Everyone is young at some point.  The lucky(?) of us also become old eventually.  A bit of cruelty in life causes the young to believe they will always be young, and the older of us to regret having wasted so many opportunities to do smart things when we were young.  Let’s not waste a lot of words on this topic.  The simple fact is that for virtually all of us, you won’t have the money you need as an old person unless you are smart enough to save as a young person.

Spending beyond your means

Do any of these sound like you?

“But I had to have it!”
“Everyone else has one.”
“I put it on the card – I’ll get points.”
“Yeah, but I deserve it!”

If so, how often do you hear yourself saying any of them?  If you can honestly say only once in a while, then maybe “No harm – no foul” may apply.  But if you look at your treasure trove of stuff and can remember using some weak rationalization to justify many of the purchases, you may be headed for trouble, or are already in it.

News break:  you can’t spend more than you take in.  And if you don’t understand that buying stuff on credit and paying monthly minimums is a financially lethal way of doing things, then I’ll give you a really good deal on some land I inherited on Jupiter.

Careless credit use

This item is closely related to the spending thing above.  Credit is a two-headed creature; one head is beautiful and smiling, the other is from a nightmare.  That is to say, how you use credit determines whether it is your friend or worst enemy.

When is credit use your friend?  An example would be taking a mortgage to buy a house (that you can afford!).  In doing this, you rent money from someone else and pay it back and the debt is gone.  And you still have the house you purchased.  All yours, free and clear.  And the enemy part?  Well, if you put three weeks in a penthouse suite in a luxury hotel on Bora Bora on your credit card (because you were already cash-strapped), you’ve committed a credit foul.  You will pay back, to the card company, the money you rented from them for the hotel, and also the very high rate interest for the length of time you rent their money.  And all you will have in exchange are the memories and hopefully a lot of photos.

If your income is sufficient to overcome misuse of credit, lucky you and may it always be so.  If it isn’t, you are digging yourself a hole and passing the dirt up to helpers who have yet to find out you can’t pay them either!

Heeding bad advice

Many things we encounter in life are difficult to readily identify; zirconium mimics a diamond, Spam mimics(?) something edible, and so on.  And, unfortunately, lesser things can be mistaken for quality advice, especially when it relates to money.  Among the lesser things are guesses, opinions, sales pitches and bad advice.

When you receive financial advice, solicited or not, take time to consider the source.  Without some discernible track record or verifiable reputation of competence in financial matters, take caution.  This caveat does not automatically exclude your Brother-In-Law, for example, but the fact that he is a great guy and also the finest dentist in the state will not suffice for your need.

And limiting a search for advice strictly to those in the financial services industry or a financial TV show will not guarantee you will get the advice you truly need.  Remain mindful of the source’s qualifications, and motives.

Be aware that often sound advice is something you don’t want to hear!

Catastrophic risk

Few things can destroy the quality of life for an individual or family more completely than a catastrophic uninsured loss.  Trying to skate by without comprehensive and adequate insurance is totally a fool’s errand.  The areas of risk you need to provide for include loss of life (and income), loss of property, liability to others and health.

One other risk category to be aware of is that of needing  long term care for a chronic condition, one from which you cannot recover.  This is an area where there is much “advice” about what long term care insurance is, what it does for you, and whether you need it.  I put the word advice in quotes because some advice is based on a flawed scope of the risk.  Even many well-regarded sources of financial information would have you believe that long term care insurance is nursing home insurance, and therefore limited to old-age situations.  In fact, long term care insurance provides coverage to a person of any age who comes into a chronic need of care.  Aside from old age, such a chronic need could come from other sources such a serious auto accident which causes loss of such functions as self-dressing, self-toileting, self-feeding, and possible need of life-support medical equipment.

I very strongly encourage you to look carefully into this entire issue.

Of course, like all insurance, there can be many “moving parts”, and there are few generalities possible about long term care insurance.  But some patient research is in your best interest.  Two things should be understood; first, the actual risk to you and why the health insurance you may already have won’t protect you from chronic needs; and second, you need some idea of the types of specific insurance available.  Now, I don’t make any money from anyone buying long term care insurance.  But I’ve owned a lifetime policy for years, and so has my wife.

In fact, for no-bull information, check with the US Government for non-commercial info:

https://longtermcare.acl.gov/costs-how-to-pay/what-is-long-term-care-insurance

https://www.nia.nih.gov/health/what-long-term-care