Thursday, January 28, 2016

"10 Financial Choices You'll Regret in 10 Years" Life is full of financial decisions, some simple, some complex, but all with the potential to make a real impact on your life. In a decade, your world can look quite a bit different than it is today – all because of these decisions.

Today I'd like to focus on some financial choices you're likely to regret in 10 years. I'd like to save you from the pain, the chaos and the heartache that occurs when people make these decisions.

Put these on your not-to-do list. You'll be glad you did.

10. Letting Recurring Expenses Rule Your Budget
Have a high smartphone bill? Paying too much for garbage service each month? How about that cable TV bill – how many channels do you have that you don't really watch?

9. Not Getting on the Same Financial Page With Your Spouse
If you want to crash and burn financially, not getting on the same page with your spouse about money is a surefire way to do it.
When you got married, you became one – one in purpose.

8. Putting Retirement on the Back Burner

Saving for retirement is critical. If you're trusting Social Security to be your sole source of income, think again. It's not likely that you'll be able to maintain your lifestyle with Social Security benefits alone. If you would be able to, congratulations, you're living pretty frugally!

7. Ignoring Your Insurance Options
If you were to die right now, would your family be financially OK? If not, you may need life insurance.

6. Letting Hubris Get in the Way of Smart Investing
If you're not a financial professional or haven't been exposed to financial education, you really can make some huge mistakes by going it alone. That's not to say some people can't do it, but you may regret it down the road when you try to short a stock (a move that the pros make) and end up losing a huge amount of money. Investing in your own financial education by at least meeting with an adviser, however, is smart.

5. Buying a New Vehicle When You Can't Afford It

Vehicles are important for many people, but they can also become a discretionary black hole. If you are planning on buying or leasing a vehicle when you know you don't have the money, please don't.

4. Neglecting Your Emergency Fund
Emergency funds help protect you from the inevitable. You're going to have a financial setback at some point. It could be a few hundred dollars, or a few thousand.

3. Buying a Financial Product Without Doing Your Homework
I know a woman who paid more than $3,500 in variable annuity fees and didn't even know it. Don't think it can't happen to you.

2. Not Paying Off Credit Card Balances Every Month
Credit card debt can pile up fast. If you're not paying off your credit cards every month, you should start. The interest on credit cards can divert money from other important goals like buying a home or saving for retirement. (You can make a credit card payoff plan using this calculator.)

1. Waiting to Start a Budget
Have you procrastinated on starting a budget? It's time to sit down and get your spending under control.
The beautiful thing about a budget is that it not only keeps you on track with your spending, but it tells you what you should feel free to spend. Have you ever eyed a triple-scoop ice cream cone and thought to yourself, "You know what, I'm not sure I should buy this – perhaps I'm spending too much money on little things."
No more, my friend. No more. When you have a budget, you know how much you can spend and still be OK.
The long-term benefits of having a budget are incredible.


Meade said...

The reverse is also true, I tell my kids. No regrets. Peace of mind.
1. Get married
2. Stay married at least until your youngest child leaves home
3. Read to each child every day beginning on Day 1
4. Live within your means, never in debt
5. 1--10 above

Do all of that and you'll be a true conservative (like it or not).

bagoh20 said...

One I see a lot is buying gifts you can't afford. I see this mostly with women, who buy holiday gifts, birthday gifts, baby shower gifts, gifts for friends' children, etc constantly until they are in deep credit card debt. It's the thought that counts, so keep it reasonable.

Something I think most people miss who overspend on their luxury is that people will like you less when you have expensive stuff. You buy expensive things to impress people, but what that really does is make them dislike you. Nobody thinks you're cool for driving a Lamborghini. It can get you laid, but most people just think you're an ass. Hmmmm, maybe I can live with that.

I can afford pretty much anything I could possibly want, but my car is a 7 year old pickup truck that I bought used. My Presidential desk at work is a folding plastic table with a $40 chair. People tell me I'm frugal to a fault, but I just don't have any desire for fancy stuff. I think that's a major reason that I can afford it if I did.

If you want fancy stuff, get rich first. Doing it in reverse order is probably the most common mistake, and remember, all your friends will hate you for it anyway.

Dust Bunny Queen said...

If you want fancy stuff, get rich first. Doing it in reverse order is probably the most common mistake,

Good advice. When I was young, in college and working a full time job at Ma Bell, this thought process always helped me to avoid buying impulse purchases or to justify if it was worth it.

"How many hours of my time, sitting here doing this boring crap job will it take to buy this thing?" Is it really worth 10 hours of my life to buy these new boots when I can get these other boots for 3 hours of time. I know....pretty trivial but it helps to bring the items into reality.

Time IS money. Do I want to spend/waste my time for THIS? Do I really NEED this? Generally the answer is no.

Rethink your priorities before you get into debt.

ricpic said...

All these rules are solid IMO but then there's the matter of temperament. If you're essentially a timid person, not a risk taker, than it's of the utmost importance that you always maintain a certain surplus "just in case." In fact such a person would have no peace of mind if he spent it all. Others have the confidence that somehow someway one way or the other they'll survive and even thrive if they spend it all and wake up penniless in a strange land. Some are prudent. Some are adventuresome. At the end of a lifetime who's to say who lived right?

Okay, the above was all vague BS and I know DBQ is gonna come along with a bunch of specifics that really amount to something but I had to have my say! :^/

ricpic said...

She already did!

bagoh20 said...

There is one piece of advice that will make all the rest unnecessary: Be Lucky.

Luck is what happens when you only play the odds that are broadly and reliably in your favor.

Dumb Plumber said...
This comment has been removed by the author.
Michael Haz said...

1. Take a Dave Ramsey course. Do what Dave teaches.

Dust Bunny Queen said...

OOOP....posted under my husband's ID.

#7. Is so important and one of the hardest things that I had to convince people to do.

Ignoring Your Insurance Options
If you were to die right now, would your family be financially OK? If not, you may need life insurance.

It is enticing to get cheap term insurance when you are young. Hundreds of thousands of dollars of coverage for hardly anything. Unfortunately, you are not always going to be young and/or healthy. Most people don't want to face this fact or think that they will be forever young.

Buy a PERMANENT policy when you are young and lock in the premiums. Term insurance gets more and more expensive as you get older and often the coverage is dropped because it becomes unaffordable. Leaving you older in less health and completely uncovered by ANY life insurance.

Term insurance is cheap for a reason. Statistics! Hardly ever do the insurance companies have to pay out a claim because the young people don't die while they are covered and the term insurance is mostly canceled before people get to the point when they will die and make claims. Term insurance is a suckers bet unless you are only getting it for a limited short term need. Cover a loan. Collateral.

In addition, a permanent policy will build up cash value which you can access as a TAX FREE loan down the road if you need to. Current interest rates, which contribute to the cash build up, are really sucky which is why the new policy premiums are higher....but those older polices are golden! If you do take a loan from your policy be careful not to collapse the contract by taking too much out.

I often used life insurance for business sell agreements, estate tax coverage, key man, executive benefits and compensation packages.

If you are young....get a permanent policy!

bagoh20 said...

I think this might help. I just bought it for some people in my life.

Fuck Feelings

Dust Bunny Queen said...

@ Bago

LOL I just bought that too!

bagoh20 said...

Not all debt is bad. Knowing how and when to go in debt is the secret to building real wealth, and it's virtually impossible to do it otherwise, but also most people are broke because they did it wrong.

Methadras said...

DBQ, are you still available for advice? I'd like to talk to you about a couple of things if you are available.

Leland said...

I'm with Haz and Dave. I'll admit to not being gazelle intense, but I got rid of credit cards a decade ago and my only debt is the house.

bagoh20 said...

Never get a credit card until you don't need it, so you never have to carry a balance over 30 days.

And never, never, regardless of the whining and gnashing of teeth should you get your child a credit card. It's like giving them a supply of financial heroin.

Dust Bunny Queen said...

@ Methadras

Sure. I'd be glad to talk. Sorry I didn't get back sooner, I've been a volunteer librarian all day. Perhaps we can discuss off of the blog??? Probably everyone else isn't interested.


deborah said...

What about online banks? I read they now offer 3-4% savings rates, where brick and mortars are at about .01% WTF?