Dumbest things to do with your money.

The internet is a wonderful source of information and the following is a compilation of thoughts from a variety of sources. I say a compilation because I do not concur with some of the thoughts from a base article I encountered and have supplemented based on experience.

Falling in love—with your investments. You must continually assess if your invested dollars are still solid and meeting your goals. This includes all types of assets, not just stocks, bonds, mutual funds, etc. I counsel too many folks who are emotionally tied to their assets and unwilling to part with them when the value can be better used elsewhere.

Chasing a fantasy.  Many purchases are made based on record of exceptional performance. Stocks and mutual funds are purchased based on a recent track record supported by glowing statistics or generous analogies. Beware!!! Always look at the dark side of the sales pitch.

Equating “on -sale” w/good deal.  Which is a better deal? A $1200 washing machine on sale for $800 or a machine with an original price of $800. Answering this question requires research. Consider the fact the $1200 machine may be truly worth $500. The word sale does not equate to good deal.

Retaliatory spending.  When you are feeling depressed, it is always a spirit builder to purchase something. If your spouse purchases something expensive w/o consulting you, then you have every right to buy something for your self equally expensive. Purchases made while depressed or angry will provide a drain on your savings or ability to save.

Hanging on to debt.  Being debt free should be everyone’s goal. It is common to have debt compounding at 20% or better and have savings accounts with minimal interest accumulation. Consider taking savings dollars and apply to your debt.. I understand having some savings for surprise expenses. But having more than $5,000 in a savings account is generally wasteful based on the disparity of investment income vs. debt growth.

Parental Martyrdom At what point are the kids responsible for their own mistakes? Parents do not want to see their kids suffer, and more specifically the grandchildren. So they use the money saved for their retirements to bail out the kids. Only to find the kids will not change their circumstances and will be back to the “feed trough” again and again. This is called spending the inheritance early. And for most parents and grandparents it means sacrificing their future living standard.

Cyber insecurity.  It took me a long time to get to a level of trust in the computer age before I would consider on-line banking. Now that I have made the plunge, it is wonderful since I save over $600 a year in postage. My primary fear has always been stealing my identity and money. Rest assured, using the postal system is far more dangerous. Theft of mail is a leading cause of identity theft and opens avenues to bank account theft.

State of denial  Last month I discussed this issue as well. Ignoring the problem will only make things worse. One item going to collection and ultimately to legal proceedings can easily double the original debt. Do you want to pay a legal debt or do you want to pay a bunch of collectors and lawyers in addition to the original creditor? It is a basically a game of “chicken” to see who blinks first and you have all the downside of this bet.

Hoarding money.  Be “thrifty “if you wish, but give some away now. It feels good to help others. I always enjoy the feel good headlines where some person considered a pauper gives millions to heirs, schools or other institutions. Funds are needed now to help others.  And the interesting part is the stories of how the gift has been returned many times over.

So the question is: What dumb things to you want to change in your life???

The author has 20 years financial counseling experience and has helped countless families build wealth. If you have questions about this article or have ideas for future topics, please contact him @ 575-9395.