Do You Make These Financial Mistakes?

When it comes to personal finance too many people bury their head in the sand. They make mistake after mistake never learning from them. Face up to those mistakes, learn from them and prosper. Don't feel bad, even the brightest of people mess up once and awhile. All of us have gone 'Doooh!' at one time or another.

Here are some common financial mistakes you may be making. Recognizing them is the first step toward correcting them. Taking action is the second step.

Not Having a Financial Plan

Success with money starts with treating your finances like a business. Every business starts out with a plan and so should you. Every business tries to run at a profit and so should you. This means creating a budget and sticking to it. It means setting goals with your money and your investments. This should be a written plan that is gone over every quarter so you stay on track. You may want to have a financial planner do this for you. Having a financial planner makes it easier to stay the course, but make sure the planner has your best interest in mind.

Investing in Things You Don't Understand

Keep your investments simple. If your portfolio includes assets that only a hedge fund manager would understand, then it's time to get out. Stick with the tried and true like stocks, bonds, and mutual funds. Don't get swayed by the online courses trying to teach you to make millions though trading. It's a good way to go broke in a hurry. Manage your risk by diversifying or buying good companies on the cheap.

Financing Everything

Don't finance things or run up credit cards. If you can't afford to pay cash for it then you can't afford to get it. It sounds like no big deal to add on another $100 per month in financing, but if you lose your income, you still have to pay. Each time you add a monthly payment, you add another link to your chain of bondage. Do you really want to live a life of slavery?

Not Having Back up For Emergencies

Start learning to save a portion of income for back up. Invest in low risk securities so that it's there when you need it. It's also good to get in the habit of holding on to windfalls instead of spending them. You should have at least six months of salary as back up.

Too Little or Too Much Insurance

You should have insurance for all of the major things like home, auto, life, health and income. If a potential loss would result in a financial disaster for you, then you should have insurance for it. Conversely, you don't need to insure every little thing like auto repair or your pet. These losses are recoverable without too much sacrifice.

Not Saving for Retirement

Not taking advantage of a 401k and/or a company match is one of the biggest mistakes people make. 401ks are the best investment vehicle available for retirement, but shouldn't be your only means. If you can, you should also invest for cash flow like dividend paying stocks, bonds or real estate. That way you are not drawing down your 401k just to meet monthly expenses, but it's there when you need it.

This is by no means a comprehensive list, but taking care of these things will put you back on track to a better financial life.

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