Money Spending
Everyone makes financial mistakes – like the man who died before he told his new bride the location of his safe-deposit box, or the low-income fellow who invested the family savings in tax exempt bonds instead of corporate bonds, which would have paid him much more.
The most common financial mistake is a failure to define your goals. Few people know what they really want their money to do. Several years’ accumulation of savings or a sudden inheritance or other windfall leaves them with money to invest and no idea of how to make it best work for them.
The most common financial mistake is a failure to define your goals. Few people know what they really want their money to do. Several years’ accumulation of savings or a sudden inheritance or other windfall leaves them with money to invest and no idea of how to make it best work for them.
What is your goal? For example, are you saving for college tuition, or future security? A necessary first step to accomplish your goal is to estimate just what you want your money to do and how much you will need to do it. The next step is to figure out how much you must put away each week – or month – to reach your goal.
Another common mistake is failure to follow through on your financial goal. The cost of not making investment moves immediately can add up. Say that, after a check of your personal finances, you decide to shift some money from your low-paying savings account into higher-yielding Treasury bills. If you delay just a few months, your procrastination can cost you a bundle of money.
A third financial mistake is the failure to maintain careful records. You have to keep – and keep updated – lists of your investments, your bank accounts and any financial advisers you might have. Your personal financial file should list names and amounts of all your securities, money-market funds, hard assets and life insurance policies. It also should give the location of your safe-deposit boxes and contain your tax records and credit-card information, as well as wills and deeds.
Another common mistake is failure to follow through on your financial goal. The cost of not making investment moves immediately can add up. Say that, after a check of your personal finances, you decide to shift some money from your low-paying savings account into higher-yielding Treasury bills. If you delay just a few months, your procrastination can cost you a bundle of money.
A third financial mistake is the failure to maintain careful records. You have to keep – and keep updated – lists of your investments, your bank accounts and any financial advisers you might have. Your personal financial file should list names and amounts of all your securities, money-market funds, hard assets and life insurance policies. It also should give the location of your safe-deposit boxes and contain your tax records and credit-card information, as well as wills and deeds.
Keeping it is not only a wise precaution in case anything happens to you; it is also a constant reminder of your financial position. If you are always aware of where your money is, you can take advantage of tax changes and map out new investment strategies. Keeping such information complete and correct makes it easier for you to switch around your investments and eases the burden on your family if you become ill or injured.
Still another common financial mistake is greed. Some people are so obsessed with making tax-exempt or tax-deferred investments that they often miss much more lucrative, if taxable, investments. You should look for good, sound economics in an investment before you weight the tax benefits. This is especially true now that reform has eliminated or reduced the tax advantages of many investments.
It is a mistake to heed advice from people who are not qualified to give it. Amateurs – like your next-door neighbor or your cousin’s son-in-law can do more damage than good. You are better off soliciting and then carefully considering professional advice from brokers, bankers, attorneys, accountants of financial planners. Fees should be agreed on in advice, but sometimes the advice is free.
Another common mistake is a failure to keep an open mind about investment opportunities. Many people invest in just one thing and stick with nit. Huge sums of money are still locked away in passbook savings account, which typically pay interest of only 5%. Higher-yielding money-market funds, Treasury bills, short-term income trusts or tax-deferred annuities are safe as well as rewarding, but many people are- in the words of one savings bank president – too lazy or afraid to move their money.
One of the biggest mistakes most people make with their money is not hedging their assets and not diversifying their investments. If you have a variety of investments, you stand a better chance of riding out any financial storm.
The worst mistake an investor can make is to assume he or she will not make a mistake. It may be comforting to learn that some of the most knowledgeable people in the worlds of finance have made some awful gaffes with their money.
To recapitulate, here are ways you can head off serious losses in your personal finances:
Still another common financial mistake is greed. Some people are so obsessed with making tax-exempt or tax-deferred investments that they often miss much more lucrative, if taxable, investments. You should look for good, sound economics in an investment before you weight the tax benefits. This is especially true now that reform has eliminated or reduced the tax advantages of many investments.
It is a mistake to heed advice from people who are not qualified to give it. Amateurs – like your next-door neighbor or your cousin’s son-in-law can do more damage than good. You are better off soliciting and then carefully considering professional advice from brokers, bankers, attorneys, accountants of financial planners. Fees should be agreed on in advice, but sometimes the advice is free.
Another common mistake is a failure to keep an open mind about investment opportunities. Many people invest in just one thing and stick with nit. Huge sums of money are still locked away in passbook savings account, which typically pay interest of only 5%. Higher-yielding money-market funds, Treasury bills, short-term income trusts or tax-deferred annuities are safe as well as rewarding, but many people are- in the words of one savings bank president – too lazy or afraid to move their money.
One of the biggest mistakes most people make with their money is not hedging their assets and not diversifying their investments. If you have a variety of investments, you stand a better chance of riding out any financial storm.
The worst mistake an investor can make is to assume he or she will not make a mistake. It may be comforting to learn that some of the most knowledgeable people in the worlds of finance have made some awful gaffes with their money.
To recapitulate, here are ways you can head off serious losses in your personal finances:
- Define your goals. Give careful thought to what you want your money to do for you. Then follow through, by saving and investing.
- Keep careful records, and review and update your financial plans regularly.
- Get your advice from professionals- stockbrokers, bankers, attorneys, accountants, insurance agents and financial planners. Make sure they coordinate all the advice they give you.
- Keep your knowledge of investments up-to-date by reading widely.
- Put your money in a variety of investment that can flourish in different financial climates. That way you can minimize the cost of any errors.
- Push yourself hard to ask questions – of yourself, your advisers and anybody trying to sell you can investment. Remember: Nobody is infallible, and there are no dumb questions – only dumb answer.
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