During the COVID era, many people are more conscious of saving money and watching for money mistakes. If you are trying to be financially prudent during these unprecedented times, remember not to make some of the severe errors with money we mention below!
Owning a home is the foundation of the American dream, and with interest rates below 3%, many Americans are tempted to take the plunge in 2021. But it’s not always the right option.
Depending on where you live and your financial situation, it CAN make sense to buy a home. But sometimes you are better off renting. This is especially true if you live in an expensive area, such as Boston or Los Angeles.
Instead of spending tens of thousands of dollars on a down payment, consider investing in the stock market. Or buy an investment property that pays you a substantial rate of return each month.
Many financial experts say there is never a good reason to lease a car. If you lease your next ride, you pour money into three or more years of car payments, and you have nothing to show for it when the contract is up.
Financing a car is a better choice, but if it takes more than three years to pay it off, you’re buying out of your price range.
Buying a used vehicle is another solid choice. Buying a reliable car that is four or five years old can save you thousands of dollars.
You might have a friend or family member ask you to cosign a car or mortgage loan. It’s never a wise move. The better option is to say ‘no’ and say ‘yes’ to yourself.
When you co-sign any loan, you are responsible for paying it back if your friend or family member defaults. Life is full of unknowns – we saw that big time in 2020! – and if the borrower can’t pay for any reason, you’re stuck.
Plus, if the borrower pays late, your credit rating suffers.
Avoid early retirement if you can and don’t take Social Security at 62. It’s worth it to wait until you’re 70. Why? Every year you wait from 62 to 70, you get a guaranteed 8% increase in your monthly payment.
Waiting to take Social Security until 70 will give you 75% more money than what you get at 62.
Living into your 80s is a definite possibility, so you want to make sure your finances live as long as you do.
When stocks take a hit, such as during the early days of COVID-19, some investors ran for the hills and sold. That’s not smart.
Rather than selling stock, consider investing the same amount each month, no matter the market conditions. If you do that, a tanking stock market becomes a good buying opportunity.
If you bought many blue-chip stocks at the bottom of the 2008 market crash, you are in excellent financial shape today.
Borrowing money from a 401k can turn into one of the biggest mistakes you ever make, primarily if you use the funds to pay off debt. You may be barred from adding money to the account for up to six months, so you will lose chances to make pre-tax contributions to reduce your taxable income.
You also can lose out on significant earnings if the market rises when you borrow the money.
Now that you know the things not to do with your money, consider using a helpful financial tool such as Cleo to save and invest your money wisely.