A recent issue of Consumer Reports Magazine detailed the seven most common money mistakes gleaned from a national survey about Americans’ money habits and provided the following advice on how to avoid them:
1. Not updating wills and beneficiaries. 86% of those surveyed by Consumer Reports had not updated their wills or other estate planning documents for five years. Recommendation: check your will and beneficiary designations for life insurance policies, investment and retirement accounts every year to ensure they reflect any changes in your life.
2. Not sharing financial information with family members. Only 30% of those surveyed said both spouses were equally knowledgeable about their financial information. Recommendation: designate a safe or file cabinet for all your estate planning documents and financial account information (including website log-in information) and tell your family.
3. Screwing up your 401(k). Just 40% of those surveyed said they take full advantage of defined-contribution retirement accounts, and 91% said they never reviewed the fund expenses for their plans. Recommendation: 401(k) plan administrators are now required to send statements to investors outlining fees and these statements should be reviewed to see how fees compare with the recommended average of 0.2 percent or less. Plan holders need to also contribute the necessary amount to get the full employer match.
4. Underinsuring your home and life. Only 36% of those surveyed had the necessary homeowners insurance to cover the full replacement value of personal property, and just 20% of respondents had sufficient coverage to protect against liability lawsuits. Recommendation: If you need to economize with your homeowners insurance, choose a higher deductible rather than going without the necessary coverage to protect your personal property and to cover liability issues. Look into disability and life insurance as well to protect your family against loss of income.
5. No emergency fund. Just 29% of survey respondents said they had an emergency fund to cover 3-6 months of living expenses. Recommendation: Saving just a small amount at a time – even $20 per week – can help build that important emergency fund.
6. Not checking your credit report. 81% of survey respondents said they don’t ever bother to check their credit reports, even through identity theft is the fastest growing crime in the U.S. Recommendation: you can obtain a free credit report every year from each of the three major credit reporting bureaus (Experian, Equifax and TransUnion) at annualcreditreport.com. Get one report every four months to make sure your record is clean.
7. Not managing debt. About 20% of those surveyed said they had credit card debt of more than $10,000. With the average interest rate on credit cards at over 14 percent, that debt can stretch for decades. Recommendation: Focus on retiring debt by paying more than the minimum each month.
The Flanigan Law Group is an Irvine estate planning, administration and litigation legal services law firm. To learn more about protecting your assets, contact the Flanigan Law Group at 949-450-0041.