In sports, even the flashiest of moves or the cleverest of strategies won’t help you win if you haven’t spent time practicing the fundamentals. Likewise, savvy investors often have bad habits when it comes to managing their finances. Fixing these simple errors can help you build a solid financial foundation.
Five Habits to Break:
- Not talking about your finances. Here at Adviser Investments, we love to talk about money—but we know that makes us pretty unique. Finances can be a difficult topic to broach with loved ones; making sure you and your partner are on the same page about types of debt, spending habits, current assets and financial goals is important. We can help you get the conversation started if you feel stuck or would like some guidance.
- Not budgeting. Do you know where your money is really going? Many people have a clear picture of major monthly expenses, like their mortgage and car payments, but are surprised to find how much of a bite all the “little things” take out of their wallet. For example, spending $10 on lunch at work every day will cost you about $2,500 a year. Creating a budget helps you develop a clear picture of your cash flow and prevent overspending. (Click here to read more on budgeting and download a copy of our Budget Worksheet to help you get started.)
- Not saving for emergencies. Car breakdowns, basement floods, the odd root canal—such unpleasantries happen to us all eventually, but many of us aren’t adequately prepared for them. Studies show more than 40% of Americans couldn’t cover a $1,000 emergency from their savings, placing them at the mercy of their credit cards when disaster strikes. We recommend keeping three to six months of living expenses in savings to help cushion the blow of a lost job or major medical emergency.
- Not paying off your credit cards. If you don’t have a clear picture of your cash flow, it can be all too tempting to simply carry over your credit card balance to the next month rather than riskThe probability that an investment will decline in value in the short term, along with the magnitude of that decline. Stocks are often considered riskier than bonds because they have a higher probability of losing money, and they tend to lose more than bonds when they do decline. an empty checking account. Carrying credit card balances with high interest rates can costs thousands in fees over time. Spending according to your budget, lowering your balances over time (once you have an emergency fund) and eventually being able to pay off your cards in full each month will boost your credit score and let you take advantage of credit card incentives without hurting your finances.
- Not having a plan. A simple budget isn’t quite enough to achieve your lifelong financial dream. A financial plan serves as a roadmap, helping you pinpoint your goals, make the best out of your assets and identify gaps and weaknesses. You can’t put a price on having a clear path to getting where you want to be in life and knowing that you’re on it—a good financial plan can help bring you that peace of mind.
If you’d like to talk more about creating your own financial plan or breaking any of these habits, give your portfolio team a call. We’re happy to help.
You can’t put a price on having a clear path to getting where you want to be in life and knowing that you’re on it—a good financial plan can help bring you that peace of mind.