Personal Finance Mistakes

There is talk on a regular basis about our country being in recession and that is a subject that is debatable so I will not touch on it. With that said, I think that we call all agree our economy has taken a toll on everyone involved. In some recent polls 55% of Americans rate the economy as only "fair" or "poor" and believe it is only going to get worse. The overhang of unsold new homes remains very high. The foreclosure rate in the past year has tripled. Households face significant challenges including home prices falling, a softer job market, and higher energy prices.

There are always going to be challenges and unfortunately there are many things out of our control. We cannot control the job market, housing market or the oil prices. However, we can control what we choose to do with the cards that we are dealt. I have been very discouraged lately listening to people's complaints about everything that is going on. I believe it is very fair to say our economy is not where we would like it, yet it could be worse.

This is no excuse not to plan for the future. Many citizens are putting off saving money due to the world's financial situation. In this newsletter we will go over many financial mistakes and also how to avoid them. I hope that if you are one of the people that feel like it is not worth planning for your future right now you take this information into consideration.

Personal Finance Mistakes

# Having no goals. Financial success doesn't just happen unless you win the lottery or dear Aunt Sally passes away and leaves you a huge inheritance. Most people have to work at it and figure out how to achieve it. First step is figuring out exactly what you want and then putting it in action and deciding how to get there. Your financial future depends on you. You are the only one who can be successful. It takes focus and a lot of dedication.


# Not admitting there is a problem. Many of us live beyond our means and are not willing to change that. It seems the more we make is the more we spend. Budgeting is key here to being financially secure. Instead of spending $600 a month on a car payment take half of that and invest it for your retirement. You may not drive the car of your dreams, however you will be happy later in life when you are financially stable.


# Making only minimum payments on credit cards. I understand that times are rough now with our economy. Consumers are depending on credit cards for daily needs. It is easier to make that minimum payment on the card every month. The issue with this is that the bill will never go away. Credit card companies encourage borrowers to make the minimum payment. Borrowers who do not pay extra money monthly will be in debt for years to come and make credit card companies very rich. Remember you will be getting interest all the months you have a balance on that card. If you have a $3,000 balance with a 19.9% APR and make minimum payments every month it will take you over 20 years to pay that off.


# Overinvesting in company stock. A lot of employees invest in stock as a retirement option. This is a high risk gamble. Let's rewind to 2001 when Enron stock went from $90 a share to 0. Employees lost about $1 billion in savings when that happened. Financial advisors recommend having no more than 20% of your retirement money in company stock.


# Buying more house than needed. Bigger is not always better in this case. It is the American dream to have a huge house with a large family and the white picket fence. You will end up paying more for maintenance, utilities, and taxes. This will end up straining you financially. No one should be house poor.


# New cars. Millions of consumers buy new cars each year. Few buyers can actually afford to buy the car in cash, therefore take the route of financing. The issue with financing a car is that the buyer is paying interest on a depreciating asset. Furthermore car owners more times than not trade in the car before it is paid off losing even more money.