Common financial mistakes and how to avoid them

Tuesday, October 5, 2021

It is normal for people to make mistakes. When creating a financial strategy, it is likely that something will go astray. We can all learn from other people’s mistakes or previous mistakes we’ve made ourselves.

The No. 1 financial mistake would be living beyond your means. This could cause a myriad other mistakes, and while you might experience very short-term satisfaction from buying a material item, it will eventually cause stress for you and your family. Creating a budget and sticking to it is the best way to avoid this pitfall and will create long and lasting satisfaction.

The second pitfall is not taking advantage of a matching contribution from your employer’s retirement plan. This is the equivalent of walking over a hundred-dollar bill and not picking it up. How much should you save each paycheck? You will often hear broad recommendations like 10% to 15% of your paycheck. However, each situation is unique and requires a unique strategy. Saving money is simply one part of a large retirement strategy. In fact, that ties in with the next mistake, failing to plan.

I can tell you that individuals who do have a plan are substantially more likely to have an emergency fund, fund their retirement goals, save for their children’s college education, etc. In my opinion, having a plan goes hand in hand with the organization and strategy that allows for personal financial security.

Another popular mistake is not understanding the power of credit. There are many options available to keep an eye on your credit. But still, some people are worried they might hurt their score by checking it regularly. This is a fallacy. There are many “apps” you can use to make sure no one is “stealing” your credit, plus you can make sure you are not late on bills, among other benefits that won’t hurt your credit. Good credit can go a long way in helping your reach your financial goals.

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Advisory services are offered through Innovative Financial Planners, LLC, an Investment Advisor in the state of Missouri. Insurance products and services are offered through Innovative Insurance Consultants, LLC, an affiliated company.

The information contained in this article have been derived from sources believed to be reliable, but is not guaranteed as to accuracy and completeness and does not purport to be a complete analysis of the materials discussed.