The following is a staff writer post from MikeS. He is a married father of 2. So, with the cat, he ranks number 5 in the house. He loves numbers and helping people. Please leave any questions or comments below for either Mike or Crystal.
I came across an article recently in the Wall Street Journal. It was written as a tongue-in-cheek way on how to throw away a fortune. It is written to show you how you might be spending or throwing away money by accident. The author listed seven ways to throw your fortune away. I was curious as to how many of these I was guilty of in the past, and whether I was actually still doing any of them today.
Yes, I was guilty of this in the past. It was one on the reasons I was in a financial hole to begin with. My retirement savings did not begin in earnest until late 2007, when I was 32. Now, I contribute 7% to my 401k, with my employer kicking in an additional 8%. This year, I also began fully funding an HSA. These steps, along with additional savings and paying down debts has allowed my net worth to go from negative to over $120,000 in about 7 years.
Shun Retirement Accounts
I can’t say I was guilty of this in the past or the present. In the past, there virtually was no savings, so there wasn’t anything to put in a tax-advantaged account. Today, I fully take advantage of the retirement accounts that I can. With my 401k, 1% of my contribution goes into the Roth 401k option that is available to me. Since I don’t know what taxes will look like in the future, it is my way of diversifying my tax position.
Forfeit the Employer Match
Yup, I was guilty again on this in the past. It wasn’t so much that I didn’t get the match; it was that I didn’t leave the money in the account. I pulled all of it out at one point in time and paid the tax penalty for doing it. It was the right move at the time, but by doing so, I did forfeit the match that I had earned. Today, I make sure I get every dollar for which I am entitled.
Buy Active Mutual Funds
I was guilty of this in probably a couple of ways. The first being my 401k when I first opened it up years ago. I was not as diligent as I am today at making sure my expenses are at a minimum. I had probably picked whatever fund looked like it had a great return, with little thought to expenses or asset allocation. Today, my 401k funds are all index funds with low expense ratios. I have come to believe that market returns are good enough for me and that I don’t have to strive to try and beat the market. I was also guilty of this in another way, trading costs. When I first began investing outside of my 401k, I was guilty of paying trading fees. Not knowing any better, I was paying for every trade I did and thus cutting the amount I had available to invest. Since then, I have been investing with Vanguard for free. The fund fees are miniscule since I invest in index ETF’s. Thus, more of my money goes towards investing and growing my net worth.
Carry a Credit-Card Balance
Again, I was guilty of this in the past. This was the hole that I was in. I probably had $30K on credit cards at one point. I tried to minimize as much as I could any interest I had to pay, but I still paid. Today, I don’t carry a balance. I still use credit cards, but they are always paid in full when due. I haven’t carried a balance for at least 3 or 4 years, I’ve lost track of exactly when they were paid off.
Get a New Car Every 3 Years
This one I can claim not-guilty. I haven’t bought cars that often, mainly because I knew I could not afford that large a purchase. My current car has about 157,000 miles on it and I hope to get another 30,000 miles out of it. I haven’t decided yet whether I will go brand new or slightly used when I buy the next one. I’m still on the fence on that one. I have typically gone the brand new route in the past, but my views on things have evolved over time. I’m not sure that’s exactly where I want to be spending my money.
Remodel Your Home
I am definitely not guilty on this one. I have never done anything to a home simply for the resale value. When I first bought a condo years ago, I had new floors installed, but that was because I didn’t like the old floors. I kept in mind what would appeal to buyers in general with my choices, but it was not done simply for the resale value. In my current house, any remodel that is done will be done because that’s the change that I want. I plan on being in the house for 30 years; I am not concerned about the resale value just yet.
It’s good to see that I am not guilty of these practices anymore. I’d like to think I have learned quite a lot about how to manage my finances over the last 10 years. I am always on the lookout for new things to help me or new ways to save money. How about you, how many things were you guilty of?