Monday, February 21, 2011

Common Money Mistakes

Picasso, self portrait
“I'd like to live as a poor man with lots of money.”
- Pablo Picasso
The website GetRichSlowly has a guest post from Money Girl, Quick and Dirty tips for Richer Life that describes Common Money mistakes at different stages of life.

Your 20's - You've graduated college and are good making money (hopefully). Don't spend it all! And don't get cocky:
- Avoid accumulating credit-card debt: don't fall into the trap of spend and pay later
- Do participate in a 401(k): yes retirement is far away but it takes time to build a nestegg that will last for decades of retirement. Start now!
- Seek professional advice: admit it, you've new to managing money. Learn how to do it right with an advisor or financial coach.

Your 30's - at this stage you most likely have a family and home to care for. Watch out for the following:
- Emergency Fund: you should have emergency savings to cover at least six months of living expenses like rent, groceries, and utilities. Given the current economy, unemployment is lasting for more than six months so go for a year of savings if you can.
Be honest in what a month of expenses is. Look at your bank account and credit cards to see what you really spend monthly.
- Don't skimp on retirement savings: invest all you can for retirement, you won't regret it.
- Insurance: be fully insured to protect yourself from financial disaster if you lose your house, your car, or suffer extreme illness with huge bills.

Your 40's - the kids are leaving the nest, retirement is only two decades away
- Don't ignore retirement:  use online retirement calculators to see if you are on track or falling short. It is not too late to invest with 20 or 25 more years of employment
- Don't accumulate debt: Debt is the opposite of retirement savings. It eats aways at your net worth with interest payments. Aim to be debt free ASAP.
- Don't raise financially ignorant children - teach your kids to manage money. Don't let them become adult leeches that will suck you bank accounts dry. And don't pay their way into an expensive car or home. It took you years of hard work to get the lifestyle you have. They should not expect to start at your level. Also be careful with loaning money - loans to relatives are the cause of much bitterness

Bottom Line
"Taking the time to learn about money and wealth pays off whether you’re a young student, a grandparent, or somewhere in between." - Money Girl

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