9 Money To Do’s – Not!
Posted by Gail | Filed under Money Management
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9. Marrying a money moron. You can’t change people. They can change themselves if they really want to. And if they really want to marry you, they should be willing to be a grown-up about how they deal with their money. Can’t get them to pay attention? Have the money talk. Share your dreams and expectations. Ask your partner to be in bed with you when it comes to how you’ll manage your money. If he can’t, or she won’t, re-evaluate your thinking and ask yourself: Do you want to spend the rest of your life trying?
8. Procrastinating on making a will. More than half of us don’t have a will. Really? You’re never going to die? Or is it that God is holding YOU by your pompom? Grow up. Without a will you have no say on who gets your money. Without a will, you can’t plan to minimize your taxes. Without a will you’re leaving your family in the lurch. Suck it up and do the tough stuff. Make a will.
7. Buying too much house. The rule of thumb is to spend no more than 35% of your net income on housing expenses: mortgage, property taxes, insurance, utilities, maintenance. If you’re over your head on housing, it means having very little life. It can also mean you’re having to use credit to supplement your cash flow, digging yourself a hole that’ll just add to your misery. If you must spend more than 35% because home prices are so high where you live, you better have no consumer debt so you can use that allotment (15%) to make your home a manageable expense.
6. Waiting to invest. What are you waiting for? Do you think some magical can-opener is going to come out of the sky, open up your brain, and pour in everything you need to know to get comfortable with investing? If you aren’t putting your money to work, you need to find a course, read a book, follow a blog or three, and learn. Learn. LEARN. Remaining ignorant isn’t the answer. The two biggest things that affect how much money you’ll have in the future are:
how much time you have, and
how much return your investments earn.
5. Not saving. This may be the reason you’re not investing: you have no money to invest. If you don’t set something aside today for tomorrow, what are you planning to live on when you retire? It doesn’t matter how much you start with: $100, $50, $25. Open up a high-interest savings account and set up an automatic plan to have your “savings” deducted from your regular account. And remember, you can’t spend that money on credit or you haven’t saved a thing.
4. Using credit to scratch your consumer itch. You can’t afford to pay for that couch or vacation now, but you’ll be able to at some future date? Gosh, what planet are you living on? When you use credit to buy stuff, you’re spending money you haven’t earned yet. And it’s only a matter of time before all those minimum payments end up squeezing your cash flow tighter than a nun’s knees.
3. Not having enough insurance. The cheapest you’ll ever get your insurance is when you’re young, healthy and don’t need it. Buying life insurance when you’re 35 or 40 is expensive and narrows down your options. Buying disability insurance after you’re 30 is almost impossible: you’ll have picked up some physical disqualifiers and your premiums will be astronomical. Just imagine how you’ll live if you get sick, can’t work a full week anymore, and still have a family to feed and a mortgage to pay? Having enough of the right kind of insurance is the responsible, grown-up thing to do. Do it.
2. Not having an emergency fund. As your first line of defense against the unexpected things life will throw at you, an emergency fund is indispensable. Without an emergency fund, you’d have to turn to credit to fill the holes. And, no, a line of credit is not an acceptable emergency fund. It’s debt waiting to happen. You need to have cash in the bank. How much cash? Work towards accumulating six months’ worth of essential expenses. (Cable is not an essential expense!)
1. Not having a budget. If you don’t have a budget and you aren’t tracking your expenses, you have no idea how you’re using your money. You have no plan. You haven’t prioritized. You’re flying by the seat of your pants. And that can’t end well. Since you’re working so hard for all that dough, don’t you think spending a little time managing it makes sense? Nothing else about your financial life will work if you don’t create a game plan for the money coming in and going out each month. You’ll whine that you don’t have money to save for an emergency, to save for the future, to invest. You won’t know where to find the money for your insurance premiums because you don’t know where all your money is going. You’ll end up not even knowing how much house you can afford. And you won’t ever make a will because you can’t come up with the money for the lawyer. As for marrying the wrong mate, if you can make a budget together and live on it as a team, you’re almost certainly on the same page when it comes to the money.