Common Financial Mistakes

Common Financial Mistakes

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2017-08-24

Your current financial situation is the sum total of every decision relating to money you've made in the past. If you're like most people, you have had very little or no coaching, so you're just learning as you go. This means that while many of your choices may come from good intentions, they fall short as a result of poor planning or lack of knowledge. However, increasing your financial literacy and identifying where you went wrong in the past will help you avoid making more costly missteps down the road.

1. Wasteful Spending

It may not seem like a big deal when you pick up that extra-large double chocolate mocha coffee drink, but every little item adds up. Just $25 per week spent on dining out costs you $1,300 per year, which could go toward an extra mortgage payment or a number of other payments. If you're enduring financial hardship, avoiding this mistake really matters - and every dollar will count more than ever.

Here is a list of things that Americans commonly waste their money on: wasted energy bills, daily coffee purchases, premium cable packages, traffic tickets, lottery ticket purchases, unused gym memberships, tobacco, alcohol, gambling, ATM fees, expensive (unneeded) warranties, credit card interest, and so on… 

Some habits that are worth getting rid of:

1. Using out of network ATMS

2. Buying overpriced coffee every day

3. Using retirement money for extra cash

4. Not tracking your spending

5. Only paying your credit card minimums 

2. Hand to Mouth

The cumulative result of overspending puts people into a precarious position - one in which they need every dime they earn, and one missed paycheck would be disastrous. This is not the position you want to find yourself in if another economic recession hits. If this happens, you'll have very few options. Everyone has a choice in how they live, so it's just a matter of making savings a priority. Building an emergency fund is the only real protection against being flat broke if you’re faced with a job loss or a massive financial emergency. Typically, it is recommended to accumulate three to six months’ worth of expenses in your emergency fund. 

3. Retirement Planning

According to research, only one in four Americans actually plan to retire. While this is not a hateful idea and there is nothing wrong with working and being productive into our later years, there are many unforeseen things which may cause a person to forcibly retire like for health, personal, or economic reasons. 

Then again, for those who do plan to retire, there is a large portion of Americans who aren’t planning effectively and only have about $100,000 in retirement savings, with about 40% who have less than $10,000 in savings and investments. 

4. Taxes

According to the IRS, over 12 million taxpayers ask for an extension to file their taxes. This extension simply gives the taxpayer more time — six more months — to complete his or her return.

While a little more time is helpful, it doesn’t solve the problem that you hadn’t planned ahead to file and pay your taxes or even worse, collect a refund check! Being prepared for your taxes is important. Review your tax liabilities at least in the final quarter of the year, so you know what to expect when the New Year arrives. 

5. Investing

Whether you have a hard time trusting others or you feel the markets are too risky, if you do not get your money working for you in the markets or through other income-producing investments, you may not be able to stop working - ever. 

Making monthly contributions to designated retirement accounts is essential for a comfortable retirement. Take advantage of the tax-deferred accounts and your employer's sponsored plan. Understand the time your investments will have to grow and how much risk you can tolerate, then consult a qualified financial advisor to match this with your goals.

 

IMPORTANT DISCLOSURES

Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities. 

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. 

Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable-- we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC

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Founded in 1976, David Lerner Associates is a privately-held broker/dealer with headquarters in Syosset, New York and branch offices in Westport, CT; Boca Raton, FL; Teaneck and Princeton, NJ; and White Plains, NY. For more information contact David Lerner Associates Call 516-921-4200 Visit our website: www.davidlerner.com

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Contact

Jake Mendlinger
Account Manager
Zimmerman/Edelson
516.829.8374 X 232
jmendlinger@zimmed.com

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