The start of a new year often means a fresh financial and life start for many people as they contemplate their goals and dreams. Some of those goals and dreams can increase their quality of life; others, not so much.
Today we’ll share seven money mistakes you should avoid in 2016 if you’re interested in stepping up your financial game for the long term.
1. Not taking advantage of your employer’s 401(k) match.
Every year, billions of investment dollars are left on the table by employees who choose not to take advantage of their employer’s 401(k) match program. Yep, that’s billion with a “b.” In fact, an estimated $24 billion in unclaimed 401(k) match funds are left unused in the United States every year, according to a 2014 analysis of 4.4 million retirement plans by investment advisory firm Financial Engine.
If your employer offers 401(k) match dollars, don’t give away this valuable addition to your retirement fund by not taking advantage of the benefit. Instead, contribute at least up to the match percentage to instantly double your retirement investing dollars.
2. Buying a new car.
With gas prices at the lowest they’ve been in over six years, consumers might be tempted to take advantage of lower fuel costs by purchasing a brand new car. But as Edmunds.com reports, brand new cars lose as much as 9 percent of their purchase value the minute they’re driven off the lot. If the purchase price of your new car is $30,000, that means you’ve just thrown $2,700 out the window (and that doesn’t include the cost of the interest you’ll pay if you borrowed for your new car or the costs for insurance and maintenance).
If you’re eager to get — or truly are in need of — a new car, consider a well-maintained used car that you can afford to purchase with cash. Your pocketbook will thank you later.
3. Living paycheck-to-paycheck.
Even if you carry consumer debt, it’s important to your economic well-being to put at least some money into a savings account each month. The easiest way to do this is to live off a percentage of your monthly income. For instance, if your take-home pay is $5,000 a month, choose to live off $4,500 and put that 10 percent of your pay into a savings account each month. If that’s not doable, make it 5 percent.
Still not possible? Even 1 percent of your monthly income put into a savings or investment account each month will help you stave off financial difficulties as you watch your savings grow. Make a conscious effort in 2016 to put a set-in-stone percentage of each paycheck into a nonretirement savings account and to cut your expenses so you can live on less and save more.
4. Not getting serious about paying off debt.
Each year, consumers pay millions of dollars in interest on consumer debts such as credit card debt, car loans and student loans. One credit card with a 15 percent APR and $15,355 balance (the average for Americans who carry credit card debt month-to-month, according to NerdWallet) can easily mean $2,300 a year in interest paid to the credit card company. This is nearly $200 a month out of your paycheck that might as well be burned.
In order to increase your financial security and the amount of money you have to save and invest each month, make debt payoff a top priority in 2016.
5. Upgrading your housing.
Housing is the single biggest expense most consumers have each month. Upgrading your housing without serious planning and forethought can put you in danger of becoming house poor, which means you’ll have a bigger housing payment than you can comfortably afford.
Don’t make this money mistake. Instead, think carefully about what type of housing you truly need, and what type of housing you can comfortably afford, and then choose your housing carefully.
6. Failing to track expenses.
Much of the average American’s monthly paycheck is lost every year from what’s known as the “black hole” of consumer spending. Those little purchases you forget about as soon as you make them can add up to big percentages of your income.
In order to avoid the black hole of lost income, choose to make 2016 the year that you start tracking your expenditures. The benefit of implementing a spend-tracking system is that you’ll be able to easily pinpoint money wasted on things that are of little value to you and redirect those funds toward purchases that are in line with your financial goals.
7. Not having written financial goals.
Although most consumers vaguely know what they want out of their finances, few take the time to designate specific financial goals and write a plan to achieve those goals. A written goal, however, has the best chance of actually being achieved.
Take some time this month to sit down and determine what your true financial goals are, and make a written, specific plan to achieve those goals. By doing so, you’ll get the motivation you need to achieve your financial dreams.
Make 2016 the year that you take control of your money, and use it to accomplish all the goals that are truly important to you. By avoiding the money mistakes listed above, you’ll set yourself on good ground for a financially successful 2016.
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7 Money Mistakes to Avoid in 2016 originally appeared on usnews.com
