What is more frightening than witches, goblins and ghosts?
The financial outlook for an overwhelming number of Americans.
As we turn the corner to Halloween, many are preparing their costumes and accessories and putting together creative decorations for their homes that will elicit thrills, screams, and scares. There is one thing that haunts people not just at Halloween, but all year around: our finances.
Just like trick-or-treaters visit door-to-door; money comes in and money goes out. For many people this is as deep as their understanding gets with their finances. Rather than ignoring your money and leaving it to chance, now is the perfect time to take control of your financial future. As we wrap up 2021, review your situation to make sure these four money mistakes don’t creep up on you.
Being unprepared for real world nightmares
Whether your car breaks down, or you’re laid off from a job, you must be ready for life’s unpredictable turns. Far too many individuals and families lack short and long-term financial plans and many people have not put aside any dollars for an emergency. In fact, according to a recent study,1 25% of households report having no savings at all and another 26% that say they have less than three months’ of expenses covered in an emergency account.
The numbers are far more frightening when we look at the demographics for younger Americans. More than half (or 57%) of millennials (those between the ages of 25 and 40) either have no emergency savings at all or couldn’t cover three months’ worth of expenses.
It would be spooky to spend all of your time dwelling on potential disasters in the future. However, you should be aware of and prepared for the worst. Financially, this means having a decent emergency fund and making sure your life insurance is solid.
Burying yourself with debt
Credit card debt is the silent killer of financial health.
While I understand that using credit can be a tool and is certainly convenient, there is such a thing as “bad debt.” Using high interest, non-deductible consumer debt can put you into a vicious cycle of relying on credit for things you should not be using credit for. You should not charge more than you can pay off each month. If you currently have balances, then start working towards a plan to pay them off. The best way is to pay off the highest interest debt each month, while making minimum payments on the rest of your debt. Work your way down through each balance until all of them are paid off.
Mortgages, student loans, and even low balance car notes can be considered “good debt” if you manage them wisely and are using your extra resources to meet other financial goals.
Keeping your family in the dark
Everything is always scarier in the dark, and that includes your money! Even if you generally take the lead with your partner when it comes to money (or if you don’t take the lead), it’s crucial to be participating in major decisions and understand the basics of your financial picture. When it comes to making decisions about what you want to happen with your money after you have passed, it’s important to include adult children and your other team of professionals in the picture. Tax professionals, financial advisors, business partners, among others, should always know what to expect to help you prepare the best way possible.
Not saving up for things ahead of time
As we turn the corner to the season of gift giving, it is important to plan ahead. Holiday gift spending surprises bank accounts every year even though we know it is coming. A simple way to plan ahead is to figure out what you spent on gifts last year. Decide if you need to cut back or allow more room for spending. Then figure out what you need to set aside each paycheck to get to your savings goal before the shopping season starts.
There are also many expenses that come up that are tied to life events – such as weddings, honeymoons, or down payments for homes. These are expenses that should be attached to a savings goal so that you don’t have to rack up unnecessary debt. Save diligently and plan ahead to avoid being haunted by rash financial decisions. And save and invest now for retirement, so the power of compounding can work in your favor. Can you afford to wait?
Your financial future depends on what is going on right now. Think carefully before adding new debts to your list of payments. Being able to make a payment is not the same thing as being able to afford a purchase. Lastly, make saving a part of what you earn a monthly priority, along with spending time developing a sound financial plan. As the year comes to a close, the most important decision you can make is to speak with a financial planning professional to ensure everything in your financial plan is in order. The financial planning professionals at Morey & Quinn Wealth Partners invite you to start a personal conversation.
By Katie Bruno, CFP®, CDFA®, MIMFA
Morey & Quinn Wealth Partners
Raymond James® LIFE WELL PLANNED.
Toll Free: 877.541.6593
11225 Davenport St, Suite 109
Omaha, NE 68154
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1 Bankrate: https://www.bankrate.com/banking/savings/emergency-savings-survey-july-2021/
Any opinions are those of Katie Bruno, CFP®, CDFA®, MIMFA, and not necessarily those of RJFS or Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional.
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