Let’s make this the year you vow to get financially healthy. To that end, here’s a list of the critical money mistakes you need to avoid this year.
- The first mistake: Not having life insurance. If you have kids or a spouse who depend on you financially, you need term life insurance. So, they won’t have money worries when you die. That’s from Gail Hillebrand, an attorney for Consumer Reports. She says your life insurance policy should be for roughly five times your annual salary, an amount that’s large enough for your family to invest, so they can live off the proceeds without changing their lifestyle.
- Another critical money mistake to avoid: Being late with a credit card payment. You won’t just face a nasty late fee, and get interest slapped on your entire outstanding balance. A late payment also dings your credit score. Since banks share information, your interest rate will probably shoot up on all the credit cards you own.
- Another money mistake: Not having an emergency fund. Personal finance expert Clarky Davis says a lot of people avoid starting an emergency fund – simply because they’re intimidated by the idea of having to save up six months worth of expenses. Davis says you can start small and build slowly. Have $10 a week automatically transferred from your checking to your savings account. You won’t notice it’s gone but it’ll add up!
- One final critical money mistake to avoid this year: Buying lunch instead of brown-bagging it. According to household savings expert Jeanette Pavini, people tend to waste more money on day-to-day items than on major expenses, like mortgage payments, and the worst offender is workday lunches. The average lunch costs about $7, but if you make your lunch, you’ll save about $5.50 a day. That’s $155 a month, and about $1,900 by the time December rolls around again. That could equal an extra mortgage payment or be added to your emergency fund.