As the Hippocratic Oath is often (wrongly) credited with saying, "First do no harm." With that philosophy in mind, here are five money mistakes you may be making that could be adversely impacting your retirement years.
You insure the wrong things.
My husband is the world's biggest warranty buyer. He recently wanted to insure a digital camera we bought our 16-year-old daughter for her upcoming Outward Bound trip. The camera was on sale at Radio Shack for $74. The insurance they wanted to sell us cost $25 for a year of coverage. Vic was nodding his head in agreement as the salesman made his pitch: She could drop it off a mountain or into a rushing stream and as long as she retrieved the camera's busted body, the insurance would "fully" pay for it. Simple math tells us that spending $25 to insure a $74 camera is a bad investment. Throw in the retrieving the camera in order to make a claim and it's a double duh.
But what's more foolish is that although my husband buys extended warranties for our car tires, our small appliances, and our cell phones, he never thought to take out long-term care insurance. The price of a replacement toaster may be a hard swallow, but it will be nothing like the choke of the vise grip that a nursing home stay will subject our family to.
You are penny wise and pound foolish.
Good for you for clipping coupons and remembering to bring your own grocery bags to avoid the 10-cent charge at the market. It probably fills you with pride when the cashier congratulates you when she hands over your receipt and announces to the world "you just saved $4.35" by buying the items on sale. Truth is, you merely avoided being overcharged by $4.35, but whatever.
What you are missing is that these little nibbles don't amount to squat in the big picture of your finances. They are time sucks that take away attention from your bigger potential money savings. The three biggest purchases of your life will likely be houses, cars, and college educations. We don't devote nearly enough time educating ourselves about the best deals for the big three.
For example: Are you still paying a 30-year-fixed rate mortgage with a 6 percent interest rate because refinancing just seems like too much paperwork? You could be saving hundreds of dollars a month and tens of thousands of dollars over the course of your mortgage loan by just refinancing your loan.
And let's talk about your new car. Did you finance it through the car dealer? Next time, try saving up for the car and then just paying cash.
The old rule of thumb is: Buy what appreciates; lease what depreciates. Cars depreciate as soon as you drive them off the lot.
You have a pre-nup, but skipped the post-nup.
Pre-nups are terrific for two people who get together in midlife. It's an agreement made by a couple before they marry concerning the ownership of their respective assets, should the marriage fail. In other words, if Joe is moving into the home that Susan owned before they met, Joe would agree to make no claim on that house should the marriage not work out.
But a post-nup goes beyond that. It details how the couple's assets and property would be split in the event of the couple divorcing, separating or upon death. So if Joe and Susan bought a house after they married, who would get it upon Joe's death: Susan, or Joe's kids from his previous marriage? The post-nup spells it all out, right down to the last piece of Granny's good china.
You don't dot your i's or cross your t's.
This is a cliched way of saying you let small details slide that could come back to haunt you. For example, you make the effort to sign up for life insurance benefits and then forget to update your beneficiary form. Or you draw up a will but just can't find the time to get it notarized or filed with an attorney. Or you don't bother checking if your doctors are still network providers when you routinely sign up for the same health plan at the office that you had last year. If they aren't and you want to keep seeing them, be braced for much higher out-of-pocket expenses.
You delay signing up for Medicare because you're healthy and won't likely need it until later.